UNDER PRESSURE: COVID-19 and oil price plunge. Ways to mitigate
Large-scale Crisis Management – the Nobel Oil Way Risk Management Through Bloomberg Terminal The Economic Impact of COVID-19 and the Oil Price Crash on Azerbaijan and mitigation strategies
37 (2020) Welcome to AMCHAM
Regular members
Associate members A Word From Executive Director of AmCham Dear AmCham members and Friends, Issue 37 It is my pleasure to present you the 37th edition of AmCham's Credits magazine - IMPACT Azerbaijan. In these unprecedented and challenging times that brought major disruptions to our lives and businesses, we believe that AmCham Executive Director: staying connected and a sense of unity will help us to get Gulnara Aslanbayli through this historical crisis since we are all in this together. The Coronavirus (COVID-19) pandemic has harshly widened Editor: its economical and societal effects on the whole world, leaving Aykhan Nasibli millions of lives and businesses struggling to survive. Along with the coronavirus epidemic, the fall in global oil prices has also hit several sectors of the country’s economy and raised the same question in Articles contributed by: people's minds all over the world - "Will things go back to normal? If not, then what Ilgar Veliyev will be the new normal?" Eldar Mamed-zadeh Having said that, we devoted the current edition of IMPACT to "UNDER PRESSURE: Aydin Garayev impact of COVID-19 and oil price plunge on the economy of Azerbaijan and Gumru Eyvazova ways to mitigate it". Despite of such a difficult period and disrupted schedule Rufat Azizov of member companies, IMPACT team managed to get higher level interviews and articles which we believe are great aid to our members’ businesses and all Elkhan Aliyev stakeholders during this time. Bahar Kavuzova Moreover, we feel proud to mention that AmCham members recently presented Jalil Ahmadov their joint product - position papers with significant number of recommendations Rafael Pampillon focused on procurement and GDPR to the government. As usual, AmCham stands ready to support the Azerbaijani government in its efforts Advertisers: to mitigate the implications of the pandemic period as well as maintain healthy BP business climate in the country.
Take care and stay safe!
Publisher: Best regards, American Chamber of Commerce Gulnara Aslanbayli in Azerbaijan
Tel: (+994 12) 497 13 33 Editor’s Comment Fax: (+994 12) 497 10 91 Dear friends, www.amcham.az Welcome to the new edition of IMPACT magazine. Obviously, www.impact.az it covers the most relevant topic for Azerbaijan and globally – impact of COVID-19 and oil price plunge: ways to mitigate. Advertising opportunities: As we can observe, early 2020 has been a tough period. Please contact the Editor at This time not only for particular region or sector of the economy, but worldwide, almost for all sectors. Businesses [email protected] almost froze all activities, while it has been requiring a new shift in decision making and approaches in management. The articles in IMPACT Azerbaijan It is difficult, but possibly. It is costly, but no other option. express the opinions of the authors and This pandemic situation will obviously create a new vision in do not necessarily reflect the position of dealing with diverse matters. Hopefully. the American Chamber of Commerce in Within this edition you will be able to read interesting approaches from AmCham hub of experts which you can apply in your business. The topics cover reflections Azerbaijan beyond the current economic and financial matters. Authors also touch to ways to mitigate and other relevant subjects for the interest of the business community in Azerbaijan. I should also mention that it was not easy to continue developing the magazine in this financially turbulent period. AmCham members and experts contributed with lots of ideas, commitment and willingness. They created further stimulus for the editorial team to stay focused and remain the most valuable business magazine in Azerbaijan. Thank you! We deserve it!
I wish you all the very best. Stay safe and be successful!
Enjoy reading, Aykhan contents IN FOCUS 4 13
We Operate Without Any Interruption The Economic Impact of COVID-19 and Contribute to Country’s Efforts to and the Oil Price Crash on Azerbaijan Get Out of Pandemic-Caused Downturn and mitigation strategies Bakhtiyar Aslanbayli Elkhan Aliyev BP’s Vice President for Communications, External Affairs, Audit Senior Manager, Deloitte Azerbaijan Strategy and Region covering Azerbaijan, Georgia and Turkey 15
6
How to Slip-Through Post-Pandemic Business Illusions “Agility, Flexibility, and Resilience Rufat Azizov Today are the Foundations of Executive Director, Unimetal & Prometal Group Success Tomorrow” Ilgar Veliyev, 17 Country Managing Partner of EY
9
Expecting the Unexpected: Impact of COVID-19 on Commercial Contracts Large-scale Crisis Management – Bahar Kavuzova the Nobel Oil Way Legal Manager, Deloitte in Azerbaijan Eldar Mamed-zadeh Chief Commercial Officer, Nobel Oil Services 20
12
SOCAR AQS Continues to Operate in Special Regime COVID-19 and Changing Patterns Sabina Akbarova in Global Economy Head of Public Relations, SOCAR AQS Gumru Eyvazova Senior Legal Associate, GRATA International
2 Issue 37 contents MEMBER CONTRIBUTION 22 29
Risk Management Through Amcham Members’ Luncheon Bloomberg Terminal Aydin Garayev 31 Market Risk specialist, PASHA Bank OJSC
24
Committee Highlights
35 VAT Undergoes Another Beating Jalil Ahmadov CFE, LL.M., Esq. Tax Leader, Ensis Law Firm
25 AmCham Legal Update 40
What Hat Will We Wear During the Crisis? Member News Dr. Rafael Pampillon Director of Economic Analysis at IE Business School 42 AMCHAM AZERBAIJAN 26
AmCham Calendar of Events
About Us 44
27
(M2M) Discount Program Business Events
3 in focus
We Operate Without Any Interruption and Contribute to Country’s Efforts to Get Out of Pandemic-Caused Downturn
Bakhtiyar Aslanbayli BP’s Vice President for Communications, External Affairs, Strategy and Region covering Azerbaijan, Georgia and Turkey
not only about softening the impact, but also about surviving and keeping their businesses alive to be able to pick up from where they stopped at the post-Covid period.
Taking this opportunity, I would like to specifically highlight the strong and full support we have received and continue to receive from the government to address the unprecedented challenges we are facing to look after the health and safety of our people and at the same time to run our operations safely and uninterruptedly. The challenges are so serious, I would even say formidable, that I don’t think we could have solved even a small portion of the tasks facing us without the close cooperation and full support of the government. On behalf of BP I would like to thank the President’s Administration, the Operational Headquarters under the Cabinet of Ministers, SOCAR and all government agencies whom we have asked for help and who have remained ready to help us 24/7 throughout the crisis.
We can see that sharp decrease of oil prices for more than a month was hardly predictable and hurting a lot of companies, especially in oil business. What are your priorities in these challenging times? Due to global pandemic situation a lot of companies in different sectors were hurt in Azerbaijan. What would be The energy industry, unfortunately, is experiencing a double your recommendation to the government of Azerbaijan hit given the low prices situation that has been going on for to survive the economy back on track? some time and will continue indefinitely.
We believe the Government of Azerbaijan has been taking We, as operator of Azerbaijan’s major oil and gas fields, the right steps since the start of the crisis to support the have set two priorities for the business since the start of the impacted businesses across many sectors. These are exactly challenging times. the kind of preventive measures and the level of support that the society would expect their government to undertake. At First and foremost, we have to take care of our own people, our this unusually difficult time government support, clearly, is contractors’ safety and continue to support the communities vital to the affected businesses. For most businesses, this is in our neighborhoods.
4 Issue 37 in focus
The health and safety of people have always been our first normally implement them, so we have had to shift to virtual priority but at times like these the meaning we normally attach and online connection and performance. We had to change to the words “first priority” assumes paramount importance our processes and align our project management procedures given the power of its impact directly on the health and well- with the requirements of the quarantine and lockdown and being of not only our staff but also their families and close recommendations of the government. In everything we do as ones. This is the time when we should not only think of one part of our social projects we are aligned with the country`s another but also really and genuinely look after each other. efforts to get out of the pandemic-caused downturn strong We must keep connected, engage and inspire our people and with minimum social-economic losses. who are doing I would say a heroic job. Our operations staff are living for 4-5 weeks away from their families and friends, Our current social projects follow two directions: sacrificing many things they are used to doing, sometimes replacing their colleagues who for some reason cannot go 1. Support for the government`s short and mid-term efforts offshore for such a long period, experiencing the restrictions being undertaken to manage social implications of the of the controlled quarantine for one week before entering our pandemic. To achieve this goal, we have continued sites both onshore and offshore. We are really proud of our our projects that aim to have immediate effect by people who are demonstrating an exceptional sense of unity creating, maintaining and improving income generation and One Team spirit genuinely looking after one another at opportunities and increasing entrepreneurial activities these challenging times. of communities. These projects also include support for vulnerable families and people with disabilities. Secondly, we have to work even harder under the circumstances, to keep our operations running for 2. Support for the nationwide sustainable development in the the benefit of the country and its people, and our long-term. The main area of investment in this direction shareholders. We are pleased to say that all the facilities has continued to be education with the aim to increase that we operate in Azerbaijan including offshore production the quality and competitiveness of the national education platforms, onshore terminals and export pipelines have and enhance digital capabilities throughout the country. continued to operate without any interruption. All credit The Covid-19 crisis has more than ever turned people’s for this, once again, should go to the government who has attention to the importance of nationwide digitalization, in given us all the support we needed to do our job safely and particular to the capability of running public governance smoothly, and to the people who run these facilities despite all and managing businesses digitally. With the projects like the challenges created by the precautionary restrictions and Data Analytics Centre, international Master’s Degree in numerous inconveniences we are imposed on. data analytics, IT skills for high schools and others we continue to support the country’s efforts to this end. With these two priorities on our day-to-day agenda, we have, unfortunately, had to think about immediate and long-term In conclusion, I would like to re-iterate that we will continue measures and plans to keep our business competitive as we to support the country and our communities just as we will face another set of unprecedented challenges brought about continue to operate safely and reliably to deliver on the by the low oil prices. In this hugely difficult environment that commitments we have made to the government, the people we are working in, optimizing our activities, bringing around of Azerbaijan and our shareholders. We do realize that we are more and more automation and agility, creating efficiencies, all in this together and only together, with the desire to take reducing costs are more than ever relevant to what we do care of one another, to support and protect our people and every day. But the good thing is that we have a clear frame on solve the problems ahead, we can overcome the challenges how we will get through this and how we will take our business facing us today. forward. And, as Group, we have actions agreed and plans in place to ensure that our business remains healthy and Biography of our guest competitive and we can continue to deliver the much needed Mr. Bakhtiyar Aslanbayli is BP’s Vice President for energy to the world. Communications, External Affairs, Strategy and Region covering Azerbaijan, Georgia and Turkey. You mentioned that you have continued to support the In addition to professional activities, Mr. Aslanbayli also communities in your neighborhoods. Has the lockdown teaches international affairs and energy geopolitics at Baku affected your social projects in any way? State University, ADA University and Baku Higher Oil School. Mr. Aslanbayli holds MSc in International Affairs from Baku Indeed, one of the most important areas of activity for us in State University. He also completed his PhD studies at the Azerbaijan and globally at the times of the crisis is to continue Azerbaijan National Academy of Sciences. supporting the communities who live in the neighborhood of our sites. Clearly, under the unprecedented circumstances, it is challenging to continue our social projects the way we
5 in focus
“Agility, Flexibility, and Resilience Today are the Foundations of Success Tomorrow”
Ilgar Veliyev, Country Managing Partner of EY
The global spread of COVID-19 is, first and foremost, a humanitarian crisis. Based on the current figures (the article was written on 20 April 2020) it has already taken the lives of more than 165 thousand people. It severely affected the wellbeing and livelihoods of tens of millions of people the world over. Even the most economically advanced nations are finding it increasingly difficult to cope with the humanitarian effects of the spread of the disease. At the same time, the spread of coronavirus brought about what appears to be the biggest disruption of economic activity in peaceful times the world has ever seen.
It’s now evident that the current pandemic is having grave impact on all industries in all directions. While headlines in media coverage have mostly reflected customer uncertainty and the visible disruption of production and supply chains, the largest multi-national corporations, and leading international organizations face far greater risks and challenges when it comes to their people and crisis management. Top executives and leardership teams are trying hard to work out various contingency plans for the present and possible scenarios for things to unfold in future.
For nearly two decades, we at EY have been carrying out The current pandemic of COVID-19 has created new a comprehensive survey that strives to accurately reflect the vulnerabilities and unforeseen challenges for the global prevailing mood in the business world – we call it EY Global economy. The full impact of revenue and profitability across Capital Confidence Barometer. Some of the findings in the the value chain is still highly uncertain and will most likely survey’s latest edition are quite telling: 73% of executives take some time to ascertain. One thing is certain, though: expect COVID-19 to have a severe impact on the global when the situation becomes clearer, companies will make economy and 52% of global companies are taking steps to faster moves than ever before to reimagine, reshape and reconfigure supply chains in response to the pandemic. reinvent their business. After “now” and “next,” companies will eventually focus on “beyond”. Ilgar Veliyev, the managing What makes the current situation unique is that economic partner at EY Azerbaijan, shares his firm’s outlook on the downturns and financial crises that occurred in the past current calamity and provides a few immediate forecasts have not prepared companies for an international health on how the businesses will be affected and may ultimately emergency. Many major economies are facing unprecedented respond. shutdowns in day-to-day economic activity. There are not yet
6 Issue 37 in focus
models available to confidently predict the eventual outcome of this situation. At the same time, most experts tend to agree that even after COVID-19 will have been taken under control, companies around the globe will still face an uncertain financial, regulatory and legal aftermath.
While there will most certainly be no clear “winners” in this crisis, some sectors look set to be hit dramatically worse than others. But we can already make an educated guess on who the biggest “losers” will be as a result of this ongoing near- total lockdown. It’s plain to see that the closing of international borders and suspension of nearly all air traffic has hit the aviation industry especially badly which is probably an understatement on my behalf. In fact, it’s now clear beyond any doubt, that the coronavirus pandemic has devastated the aviation industry, becoming the worst crisis in its history and forcing airlines to take unprecedented measures to survive the staggering fallout.
What’s also obvious is that the COVID-19 crisis will have a profound and long-lasting impact on people’s professional and personal habits. This will consequently change the very idea of accessible, frequent and hassle-free flying. These perceived changes may have a far-reaching impact on the structure of the industry, reshape the way we think about challenges facing the airlines are far more serious than what travel and redefine a “new normal” for airlines, airports, and banks and institutional lenders faced during the 2008 financial passengers. crisis. And as governments are attempting to support their national carriers, the situation is indeed reminiscent of the 2008 financial crisis when banks in the US and Europe were bailed out by the state. Three months or so into the crisis, and airlines worldwide are fighting a severe cash shortage due to almost no passenger turnover during continued lockdowns and quarantine. All As we have to put off our immediate travel plans or cancel of this couldn’t but crush air travel demand. Carriers are them altogether, we are learning and getting used to new taking unprecedented measures to preserve their existence ways of doing business and communicating with colleagues, with broad reductions in capacity, grounding planes and customers, and suppliers. In the absence of air travel, we preserving cash as revenues have plummeted. have been helped immensely by online video-conferencing According to estimates by IATA, the international aviation’s technology. Personally, I believe that face-to-face interaction governing regulatory body, global airlines could lose about is still crucial, especially in the final stages of deal-making. Yet $250 billion in passenger revenue this year. Some industry we have all witnessed in the last months how quickly we and experts go even further and warn that most carriers will people around us adapted to the realities of social distancing collapse by May without state support. Those analysts who and working remotely. And, as I suspect, the growing use of like to draw comparisons between various industries or recent video communications is unlikely to reverse once the crisis economic downturns claim that in many respects the current passes.
7 in focus
It’s very tempting at this point to proclaim that it’s not all doom and gloom. Nor will I try to reassure everyone by projecting banalities like every dark cloud has a silver lining. Yet despite unprecedented social and economic paralysis and some troubling predictions about the state of the global economy, many global companies continue to plan major transformation programs. As our Global Capital Confidence Barometer suggests, more than half (56%) of executives globally are opting to transform through transaction and plan an acquisition in the next 12 months. So much for the global crises, heh?
While I said earlier that there will be no “winners” of the current pandemic, it’s beginning to look like consumers worldwide will be changing their behavior in response to perceived health threats in future and their governments’ responses to such threats. I suspect people’s attitudes and spending habits may adapting to a crisis — and in many ways, the unwelcome be evolving too, even if as a short-term ramification of the and unexpected emergence of COVID-19 will further cement current situation. transformational strategies in the boardroom. Talking of boardrooms, I’ll end off by chipping in a bit of Who hasn’t during the quarantine been tempted to binge- management jargon. Managing through the downturn requires watch their favorite films and television series on Netflix, HBO operational focus to preserve revenues. Therefore, planning and other popular streaming platforms while we’ve all been for recovery will see a greater focus on raising profitability and confined to our study-rooms and apartments? Reiterating attracting and retaining customers. Transformation requires my earlier premise of various sectors of economy being a shift in strategy. But that strategy itself should always impacted differently, I will also dare suggest that media, encompass an ability to transform. Agility, flexibility, and telecommunications and technology companies will come out resilience today are the foundations of success tomorrow. better off on the back of the current crises. The so-called new media services, such as music and film streaming channels, But agility and resilience, as well as other commonly used who are all operating in a more virtual environment could see business terms, are not simply trendy corporate slogans for a significant upturn in demand. us at EY. We’re committed – today, perhaps, even more than ever - to support government agencies and private companies Let’s not forget that transformation was high on the corporate alike in tackling the consequences of the pandemic and agenda even before the spread of COVID-19. These plans guiding them towards the “beyond the COVID-19” era. We have been paused for many companies. But they will no genuinely strive to build a better working world around us. doubt restart, possibly with added energy, once the situation To achieve this, we will work closely with the government stabilizes. The case for change is never stronger than when stakeholders and the business community at large to help build the economy and supply chains that could withstand pandemics or any other types of international emergencies in the 21st century.
Biography of our guest Mr. Ilgar Veliyev is the Country Managing Partner of EY (formerly known as Ernst & Young) in Azerbaijan. He holds a Master’s degree in economics from Azerbaijan State Economics University as well as a Master’s in Business Administration from the University Of Chicago, Booth School Of Business. Ilgar joined EY in 1994, and in 2007 he became the first Azerbaijani national to be appointed a partner among international accounting firms. Throughout his carrier, he has been involved in and spearheaded a wide range of projects across various markets, such as Azerbaijan, Russia (1995-96), and the United Kingdom (2001-2003). Ilgar Veliyev is a licensed Azerbaijani Auditor, member of the Council of the Audit Chamber, US Certified Public Accountant and Chartered Accountant of England and Wales. In 2013-2017 he served as the President of AMCHAM. 2016 Ilgar was awarded the “Taraggi” (“Progress”) medal by the President of Azerbaijan. He is a married father of two.
8 Issue 37 in focus
Large-scale Crisis Management – the Nobel Oil Way
Eldar Mamed-zadeh people and business. It was evident that quarantine would be the optimal response to the situation, so we have taken Chief Commercial Officer, immediate actions to be addressed in case if the quarantine Nobel Oil Services is announced.
Noteworthy, our adequate reaction to the situation was mainly possible thanks to the mindset shift within the organization that started two years ago. The change has been reflected by COVID-19 has entered our life unexpectedly and changed applying three approaches: agility, resilience, and adaptation. it massively. The outbreak of the pandemic has caught the By developing agile mindset within the organization, the aim entire world. It started in Wuhan, China and has quickly was to establish a culture of discipline to react and adapt spread within and outside the country. When the number of quickly to the external changes. Management quickly realized infected people increased exponentially, it became evident that for getting agility right, there is a need for discipline, that locking down and social distancing would be the main thoughts and actions, which would give us more flexibility and preventive measures to contain the disease. The quarantines quick decision making. across the countries, which have been pivotal in saving people’s lives, have also restricted many activities causing ruthless impact on people and businesses. And Azerbaijan has been no exception.
The government of Azerbaijan have reacted proactively in many cases, realizing the risks paused by COVID-19, by undertaking adequate actions such as social distancing and strengthening the quarantine conditions.
Management of impacted businesses are now expected to react in respect to two main objectives: keeping people safe and healthy, and protect employability; ensure business continuity and resilience after the crisis ends.
It was quite a big challenge for Nobel Oil too, as we operate in four primary segments: engineering and construction, drilling, operation and maintenance, and supply chain management. Taking into account that we have about 2,000 employees working in various fields of the industry, it is not difficult to envision the impact of the crisis on the business.
On the one hand, we’re committed to support the government activities to suppress the virus spread and on the other hand, to maintain the current operation to meet the Government demand and continue implementing its business growth strategy.
The management of Nobel Oil has started closely monitoring the situation long before WHO announced the pandemic. When the pandemic was declared, Nobel Oil established the Emergency Committee on the CxO and Head of Function level to discuss the potential impacts of COVID-19 on our
9 in focus
affiliates, moved to the quarantine regime by adopting two shifts approach. Moreover, to eliminate any potential risks of people interaction, transportation was organized for the staff’s point-to-point delivery. Morning checks and constant reminders through regular safety talks were held to ensure people stay focused and aware of the latest changes and decisions made. Some of the customers who have decided to temporarily close their facilities, all personnel except critical employees were allowed to work from home. Nobel Oil and all major offices were closed immediately, and remote work practices have been arranged for the staff members. The IT department has ensures all available tools and systems, such MS Teams, Cisco Webex, company VPN are fully functional. Our IT’s 24/7 support has been vital these days, letting organization to stay connected with its employees, clients, business partners and suppliers across the globe.
The decreased hierarchy and greater autonomy given to the people with the right skillset have enabled successful cross-functional cooperation between all business support functions. Adequate access to the right equipment, tools, services has been paramount in maintaining business continuity. Our suppliers validation tool, established some time ago, Such environment empowers employees and enables them has provided quick access to the right suppliers capable of to make quick and efficient decisions, focusing on company supporting our projects and activities in an agile way. Despite development and customer needs. challenges of a locked-down environment, PSCM has been able to quickly identified local suppliers and stocks. All Nobel Within the framework of lean operations management, we’ve Oil companies managed to avoid any shortages rapidly. In the focused on local staff, and through learning and development meantime, it was essential to mitigate commercial risks in the program, trained high potential employees who has been light of continuous expenses on remuneration and equipment. successful in their fields. It has decreased the dependency The cooperation with equipment owners has reduced those of the company on international experts. During the lock- risks significantly by applying ‘free of charge standby’. We down, while many local companies have suffered from the repatriation of their expatriate staff, Nobel Oil continued to fully operate with the local staff.
Optimization of our resources and costs significantly, has also been a fundamental part of the lean operations management system. We’ve managed to avoid duplication of roles and responsibilities by appropriately optimizing positions. So during the period of restrictions, our well-prepared and efficiency-focused approach have helped us skillfully manage our costs.
Nobel Oil has always had its emergency response teams, plans and experience to respond to crisis situations. However, the agile mindset – pivotal for success during bigger crises – has helped us to quickly come up with a set of mitigation actions and to make faster decisions.
In cooperation with clients, Nobel Oil has placed prevention plan. All facilities operated by us were equipped with the required toolkit: personal protective equipment, thermometers, sanitizers, masks and other items. The facilities of Prokon, Glensol and SDL-Nobel – all Nobel Oil
10 Issue 37 in focus
house and switch to local alternatives as quickly as possible. Needless to say, how the lack of local manufacturing and services provisions may impact the global supply chain in the times when borders are closed, and travel is restricted. Developing local skillset and standards has always been a priority in the country, however it has culminated given this world-scale crisis.
There is no doubt that the crisis will end, and better times will come. The business that consistently act in an agile way, during challenging times, will be much better prepared for the post crisis times, remaining highly resilient. It is essential for leaders to realize how important it is to turn challenges into opportunities and enable environment for better cooperation, and maintain agility gained during crisis times. Challenges should teach organizations how to maintain consistency in the application of improved capability, and adopt new skills by developing resilience against future crises.
We would summarize the suggested conclusions for business continuity in crises times, as following:
1. Focus on people and care of them is more important than processes and tools highly value these suppliers and consider to give them priority 2. Digitization is incrementally becoming a standard in and preferences in our future projects. operating of businesses The PSCM team, together with the operation team, have 3. Understanding clients and cooperation beyond written identified critical business needs priorities. They have commitments is more valuable than merely referring to postponed or cancelled non-priority items, prolonged the terms and references of a contract payment terms where possible and worked with the finance 4. Agile mindset proved highly effective in crisis times and team to postpone capital purchasing and moved from “source set the ground for organization’s resilience capability to pay” to a “budget to pay” concept, holding the right level 5. Local content and focus on fostering and boosting local inventories of scarce goods and materials. Maintaining and services and goods would contribute not only to economic enforcing working capital has also been an area of focus. growth but also to sustainable business continuity in It is worth mentioning that the established corporate structure crisis times has even strengthened cross-company cooperation. All 6. ‘Work as one team’ is about trust, achieved by functions have been conducting remote regular functional demonstrating care and competency team meetings, during which companies discuss latest progress, information exchange, and identify areas of further Author’s biography cooperation. Mr. Eldar Mamed-zadeh joined Nobel Oil Services as the Chief Commercial Officer in 2015 with deep knowledge and broad That said, the most significant contributor to the success was experience in procurement and supply activities. each function’s flawless understanding and implementation In his current role, Eldar is responsible for Commercial, of their responsibilities. Just to name some, HR has ensured Business Development and PSCM activities for the entire group that permissions for the movement of key personnel are in of companies of Nobel Oil. The key area of his engagement is place; finance has been providing a constant review of the to set up a development strategy for growth and its delivery. cash flow, and financial situation and ensuring that resources Before joining to Novel Oil Services, he worked in capacity for critical services and items are available; operations has of Procurement Materials Logistic Manager at Bahar Energy maintained the essential job without significant interruptions; Operation Company and different positions at BP, including Operational Procurement Manager and GWO Category Delivery corporate management office has provided a structural Manager in AGT region, as well as Operational Procurement umbrella to ensure consistency across the company and Manager in the Middle East Region (Oman/UAE/Jordan). functional cooperation. Mr. Mamed-zadeh earned his BBA from Azerbaijan Economic University and MBA from University of Cumbria (UK) and Robert Travel restrictions and less reliance on international service Kennedy College (Switzerland) in Leadership and Sustainability provides has been among the top challenges companies have and continued his education in Supply Chain Management at faced. This has made companies to move some activities in- the Chartered Institute of Procurement and Supply.
11 in focus
COVID-19 and Changing Patterns in Global Economy
Gumru Eyvazova beginning played an important role in creating a balance in Senior Legal Associate, the oil market, this time made every effort to ensure mutual GRATA International understanding among the oil countries. Furthermore, due to this decision, the budgets of the coming years will have to be balanced at a price below $55 per barrel, which will require budgetary cuts. Due to this decrease, it is necessary to focus on development of non-oil industry. Therefore, the activity of small and medium-sized businesses in development of In a coronavirus situation when people stay at home, Azerbaijan’s economy should be strengthened. consumption becomes limited and businesses suffer; the It should be noted that on 19 March 2020, the President of focus of solving state economic problems shift from monetary the Republic of Azerbaijan signed a Decree on establishment policy to a fiscal one. The spread of coronavirus and inability of a Coronavirus Response Fund. The “Coronavirus Control of the OPEC countries to develop joint policies contributed to Budget” mobilized in Azerbaijan covers expenses in three decrease of Brent oil price. The double shocks of pandemic directions: support, which will be provided to the sectors and political-economic news have created an environment suffering losses, entrepreneurs and employees; social of unprecedented uncertainty. As a result, oil and gas programs; and expenditures for combating the pandemic. It is companies, as well as oil-producing countries will suffer. also worth to note that Azerbaijan has contributed $5 million We see advantages of high oil price from the current level, but to the World Health Organization to support the global fight prices will remain low because of the economic downturn.In against the pandemic. terms of the apocalyptic scenario, it implies a ban on flights Regulators around the world are likely to continue to take among countries, bans on people being away from home, measures to support the economy of both central banks a sharp decline in the use of all modes of transport, since and governments. We will see a combination of monetary this industry uses the most oil. 90% of global oil demand is and fiscal policies. The question, however, is whether these connected with the themes of mobility or transport, so they measures will help, since a reduction in the rate is unlikely are important elements. If people stop driving or flying for at to help the real economy in the current situation. The least a few months, the scenario will become closer to the coronavirus crisis will be a short-term and temporary event. In situation described. However, it should also be considered 12 months, it will less excite the people; probably the effective that we expect a downturn in the business cycle, and some drugs and vaccines will be available by that time. The major people may lose jobs. Thus, they will no longer drive to work, problem is that coronavirus is new and our organisms are not which will put pressure on the demand for oil. Those who familiar with it. Hopefully, health care field will support us in continue to work will, of course, benefit from lower oil and developing drugs and vaccines. Perhaps we will look critically fuel prices, but this is not likely to push the global economy at our supply chains, particularly in the health field. Thus, let’s to growth. hope that this will not change the world in terms of increasing Considering all aforementioned facts, the 10th Extraordinary protectionism. OPEC and non-OPEC Ministerial Meeting that was held via video-conference on 12 April 2020, agreed to amend Author’s biography the Declaration of Cooperation, where quotas for daily oil Ms. Gumru Eyvazova is a Senior Legal Associate at GRATA production in OPEC and non-OPEC countries in May-June International. Before joining to GRATA International she was will amount to 9.7 million barrels, from July 1 - 7.7 million Legal and External Affairs Executive at British American Tobacco Exports B.V. Representative Office in Azerbaijan. barrels and from January 2021 through April 2022 – 5.8 Gumru carries years of experience in banking industry – in million barrels. Big oil producers, such as the US, Canada, capacity of Head of Legal Division, two global airline companies Indonesia, Norway and Brazil, having shown solidarity with in Azerbaijan – in capacity of Legal Consultant. At the same the OPEC and non-OPEC countries, will voluntarily reduce oil time, Gumru is Chair of the Board of Directors of a local NGO, production by 4-5 million barrels per day. "Khazrim" Student-Youth Organizational Public Association. Having fulfilled the obligations undertaken since May, Ms. Eyvazova studied Public and International Affairs at ADA Azerbaijan will continue to contribute to the process of University (MPP, 2018) and Law at Baku State University (LLM, balancing the oil market. Azerbaijan, which from the very 2007; BSc, 2004).
12 Issue 37 in focus
The Economic Impact of COVID-19 and the Oil Price Crash on Azerbaijan and mitigation strategies
Elkhan Aliyev Audit Senior Manager, Deloitte Azerbaijan
The social and economic impact of the COVID-19 pandemic is of critical concern to the leaders and citizens of most of the countries in the world. Azerbaijan is no exception. Given the current climate of uncertainty, there is a major question mark over what the future holds for the Azerbaijani economy, and whether it can mitigate this threat to growth and stability. The outbreak started in December 2019 in China and spread rapidly across the world. Some countries were initially able to and trying to gain market share. The ensuing price war contain or slow the spread of the virus as they had minimal flooded the market with oil and saw prices plunge towards an passenger flows from badly affected countries, or had taken unprecedented $20 per barrel in early March. early preventive measures. However, some of world’s biggest Oil prices are not entirely driven by fundamental economic economies were either ineffectual or slow in responding to forces, such as supply and demand. Market sentiment also the outbreak. Eventually, governments worldwide, including plays an important role, particularly in the short-term, as that of Azerbaijan, were forced to introduce social distancing global prices are based on oil futures contracts, rather than measures, including wide-ranging lockdowns that have current production and consumption. This is why news of paralyzed economic activity and transportation. The resulting the outbreak coupled with the unwillingness of oil producers economic stagnation, in particular significant reduction in to curb output sent oil prices spiraling to 18 years low. Oil transportation, caused by the social distancing triggered a prices subsequently rebounded on news that Saudi Arabia significant drop in global oil consumption. As shown in the and Russia will meet in the hope to find an amicable solution. below chart, transportation, including aviation, accounts for An agreement was reached on April 12 to cut oil production more than half of the total oil consumption: by 10%, but exceptionally low demand means that prices are likely to remain low at least until the COVID-19 pandemic has been brought under control. Unlike other countries with diversified export revenues, Azerbaijan has been dealt a double blow by the pandemic. Firstly, the economic slowdown caused by the lockdown regime has hit businesses hard, resulting in lost tax revenues. Secondly, given that oil and gas sales in dollars account for around 90% of the country’s exports, a low oil price environment puts considerable strain on export revenues. According to the State Statistics Committee, Azerbaijan’s total exports and imports amounted to $15.3 billion and $8.8 billion respectively in 2018, resulting in a positive trade balance of approximately $6.5 billion. Should lower oil prices persist for too long, the country’s foreign currency reserves will eventually deplete, if spending continues at its current At the same time, two of the world’s largest oil exporters, rate. Saudi Arabia and Russia had been increasing production Many countries have unveiled stimulus packages to combat
13 in focus
small and medium businesses to stop them from going bankrupt. Economic aid to businesses could take the form of grants or loans depending on the circumstances. To boost public confidence in the national currency, the government must timely and clearly communicate to public on the value of the currency. If and when necessary strict fiscal and monetary policies must be implemented to protect the country’s foreign currency reserves against panic driven hoarding and avoid potential meltdown in the banking sector. Azerbaijan imports large number of consumer goods that have the possibility to be produced locally. Over the last couple of years, Azerbaijan has been investing heavily in the non-oil and gas sector, especially in agriculture. The country hopes to meet domestic demand and export the surplus with the aim of improving its trade balance and reducing its dependence on hydrocarbons. The benefits of investment will the economic impact of the outbreak, mainly consisting of not be immediately evident, but this trend must be continued grants and loans for businesses, and financial aid for citizens. and expanded where possible in the foreseeable future. Azerbaijan has allocated AZN 1 billion ($590 million) to tackle Overall, the situation is very fluid at the moment, and a the effects of the pandemic. Some of the major economies, concerted, cohesive effort is required to manage risks to the such as Germany, have been forced to draw on additional economy and successfully navigate through these challenging loans to fund their rescue packages. To date, Azerbaijan is times. using its own funds to cope with the situation. The severity of the situation will largely depend on the duration of the crisis. Although there is wide speculation as to when the economy will be able to go back to normal, this will ultimately be determined by how successfully the pandemic is contained both internally and externally, and how quickly a vaccine can be developed. Regardless of when the economy will be able to reopen, oil prices will likely remain depressed in the short-term due to pessimistic market sentiment, and align with supply and demand in the mid-term. This adds an extra layer of complexity to forecasting how the situation will unfold and the potential damage to the economy. To mitigate the damage to Azerbaijan’s economy, the government’s short-term focus must continue to be on monitoring the spread of the virus and, when necessary, taking additional responsive measures, while supporting
Author’s biography Mr. Elkhan Aliyev is an Audit Senior Manager at Deloitte Azerbaijan. He has over 8 years of audit experience, mainly concentrated on Energy & Resources sector. Elkhan joined Deloitte Azerbaijan in 2012, and after 6 years working in the Audit Department was seconded to Deloitte’s London office to obtain experience in Oil & Gas sector. Having worked in the UK for 2 years, he rejoined Deloitte Azerbaijan in 2017, and has since been serving some of the biggest companies in Azerbaijan. Mr. Aliyev holds bachelor and master’s degree in business from State University of Azerbaijan, and he is a member of Association of Chartered Certified Accountants (ACCA).
14 Issue 37 in focus
How to Slip-Through Post-Pandemic Business Illusions Rufat Azizov is not only about eating hot meal or drinking, it is about socializing, it is about good music, dancing, acoustics and Executive Director, fruitful design. In the era of artificial intelligence, it is even Unimetal & Prometal Group possible to predict client taste, fillings, favorite wine, important day, daily workload, music, design and color, which is possible to integrate for customization in real restaurant conditions. Further, discussions have started about human behavioral changes to hygienic and health preferences. Changes “Azerbaijan has shown substantial professional approach possible, but in short term. Human brain forgetting bad thing, to COVID19 crisis management. The government acting but remember good things and anchoring on good stories ambidextrously followed two massive goals – protect people happened in the past. People’s behavior is not going to and support businesses. Urgent quarantine measures change significantly in post-pandemic period, so to design cut corona virus growth in lag phase, so the pandemia in any project on such predictions is not safe and requires Azerbaijan did not reach catastrophic peaks in comparison additional more deep research. with US and EU countries. Decrees and agenda by President Supply chain of the most production companies is seriously H.E. Ilham Aliyev related to support to businesses also bring damaged. Annual plans, forecasting, inventory management optimistic shape to the future of economic development in predictions, transportation, production and sales plans all post-pandemic period,” says, Executive Director of Unimetal, need to be revised for post-pandemic period. Companies Rufat Azizov. depending on China for raw material supply possible I would like to share my views related to global post-pandemic experiencing the worst year for the last 20 years. Proposal is issues. Many discussions going around these questions in about Chinese raw material was the main cause of shortages, global media, which creates pressure on entrepreneurs. Foggy so in the post-pandemic period companies will try to localize worldwide uncertainty designed based on health problems, raw material and other resources. Moreover, it could be the physiological stress, economic decline and continuous end of globalization of supply-chain. Logically everything media pressure pushes entrepreneurs globally to think about is true, but if to think about capital investments of shipping what world will look like after pandemic. Even now, at the companies, access capacities and low cost of China, growth phase of coronavirus debates started about how the localization of supply-chain does not seem real. traditional economic, political and social orders will change in Entrepreneurs should be very careful with popular business post-pandemic period. Entrepreneurs started to search new ideas created in coronavirus period. What works in pandemic opportunities coming from pandemic, continuously monitor period, may not work in post-pandemic era. Entrepreneur’s available business information. So what? How to start? innovation strategy should be resistant to macro shocks like From media, the most popular proposal for post-pandemic pandemic. era is the growth of online education businesses. However, having my fifth higher education in my age 40, it is mega uncertain question for me. Staying at home for quarantine period with my twins supporting them in their online courses, I have observed how it is anxious and even depressive for kids. Despite of teachers’ great efforts to make online communication funny and interesting... Online education is without socializing, networking, live communication, fillings and touching cannot be as productive as in person classes. Thus, my proposal is opposing perspectives of online education in post-pandemic period, as I think people having chance to try online education in coronavirus crisis will better understand the value of in person education and be willing to pay more for in person classes. Another popular proposal – online food delivery businesses or cooking at home will grow. I personally know many people staying at home and eating homemade meal made them nervous. The same about online food order, it cannot be substitution for restaurants. Because going to restaurants
15 in focus
Here are top questions to evaluate opportunities of innovative projects for post-pandemic period:
Strategic Intent. What is your company’s strategy? Is the new post-pandemic business idea strategically important? For example, about market size, if strategic intent for market size for new projects is more than 500K USD, so do not choose opportunity with 50K USD. If you are in construction business and your strategy is designed to enter modular construction business, so you don’t need to jump to online health care start up, as totally different business can make you unfocused from core business. What is our competitive advantage for jumping to this opportunity and is your advantage sustainable for long- term? Why do you think people will pay for this product in post-pandemic period?
Customer Centered Design. Ongoing pandemic massive information flow must not disrupt our focus about fundamental product or services design. Who is going to be customer? What are the customer needs now and why do you think they will change in post-pandemic period? Does the company had experience with that customer segmentation? Why should customers choose our product specifically in post-pandemic period? How existing and post-pandemic technology feasibility fitting opportunity requirements? What are customers new habit and what motivates customer for that activity?
Operational Capabilities. Is it possible to leverage company’s existing capabilities and resources to support new business idea? How sales, marketing, production and people competencies can be used for new opportunity? What is the pandemic and forecast for post-pandemic. Further, asses process of supply chain? What is your forecast for profit-loss how new opportunities aligns with their strategic intent, and other fundamental business management KPIs? How are operational capability, customer evolving expectations and you going to manage transformation from existing business to leadership commitment. new opportunity? For example, if your company is producing a beer, have experience in fermentation and biotechnology Author’s biography engineers, so maybe it is possible to invest in bio-pharmacy Dr. Rufat Azizov is Executive Director of Unimetal & Prometal industry, but not in online communication start up. Group (based in Azerbaijan). He is responsible for the successful performance of the business across four steel manufacturing Leadership Commitment. Even if new opportunity aligns and processing facilities: ERW Pipes Plant, Long Products with your strategy, operational capabilities and customer Rolling Mill Plant, Pre-Painted Galvanised Iron Plant, Profiling evolving expectations, it cannot be successful without Factory and Steel Meltshop Project, with a total capacity 130K leadership team commitment. Actually, lack of leadership ton/year. support kills many bright ideas in innovation departments of Rufat commenced career with BP as a Corrosion Engineer and companies. It is very hard to focus leadership on new initiative progressed to Material / Corrosion Management Team Leader. when company have existing mature businesses and stable He gained considerable international managerial experience cash flow. There will be people with companies willing to kill in oil-gas projects, operations and engineering across BP innovative idea, they are mainly operations managers “gods” facilities. Mr. Azizov is also working as a visiting lecturer at Baku of existing business. Beside all, innovation project should be Higher Oil School (BHOS), teaching Technology & Operations the goal of all company people, but have sufficient separation Management in Geneva Business School joint MBA program from mature business, maybe separate business unit and and Chemical Engineering in Heriot Watt University joint MS independent organizational interface. Financially innovation Engineering program. project also should be independent having its own budget. Dr. Azizov holds BS+MS and PhD degree from Lomonosov Coming to conclusion it is clear that available media content Moscow State University in two majors: Chemical Catalysis and will push entrepreneurs for innovative projects creating Biotechnology, MBA from Maastricht School of Management and illusion about magic post-pandemic era. Entrepreneurs before currently completing Executive MBA at Said Business School, jumping and embracing new opportunities should carefully University of Oxford. He holds a Professional Membership and review behavioral activities of people in pre-pandemic, in CSci from UK Science Council (IOM3).
16 Issue 37 in focus
Expecting the Unexpected: Impact of COVID-19 on Commercial Contracts
Bahar Kavuzova clause will hinge on the chosen law, established best Legal Manager, practices, contractual wording, incorporation of the principles of international commercial law, as well as a clear causal link Deloitte in Azerbaijan between the situation and the party’s ability to perform their contractual obligations.
(A) Speaking the language of contracts Instead of relying upon the general principles of national laws, parties can develop a different force majeure clause that Introduction applies more specifically to their industry and transaction. The unprecedented disruption being wrought by the A thoroughly elaborated force majeure clause may contain a COVID-19 pandemic is affecting the ability of companies and limited list of specific events that constitute a force majeure or individuals from all sectors to maintain business as usual and prescribe “catch-all” language covering all possible scenarios fulfill their contractual obligations. Suspended transactions, that are beyond the control of the affected party. Such closed stores, canceled events, restricted travel and similar events may: (ı) postpone the performance of obligations until constraints are creating a turbulent environment for business. the interfering factors have been eliminated, (ıı) exempt an To navigate this situation successfully, businesses have affected party from liability in full or in part, (ııı) retroactively started evaluating both their own contractual frameworks cancel the contract, (ıv) lead to a renegotiation of terms or and those of their counterparties to preempt the potential (v) simply terminate the contract if substantial failure of fallout from any interruptions and delays, if the performance performance occurs. of obligations becomes impossible. As a result, the legal To overcome the substantial differences between national profession has been inundated with a deluge of queries about laws, parties to cross-border transactions may also choose to the relief and exemptions available to parties hit by pandemic. implement model contract clauses developed by international This article provides a high-level overview of the challenges institutions (UNIDROIT, ICC model clauses, Principles of and opportunities arising from a force majeure and the European Contract Law, CISG, etc.). concepts of impossibility and frustration. Vigilant adherence to these concepts can help businesses safely navigate • UNIDROIT Principles of International Commercial pandemic-related disruptions. Contracts, 2010 Although UNIDROIT does not provide for a definition of a force majeure, it discloses the elements that allow an affected Force Majeure Clause: RELY or DENY? party to be excused for non-performance. The majority of legal systems honoring the basic principle Pursuant to article 7.1.7 of the Principles, non-performance of international law ‘pacta sunt servanda’ (agreements must is excused if the party can prove that the failure was caused be kept) allow for non-performance due to a ‘force majeure’ by an impediment beyond its control, impossible to avoid and (superior force) event. that could not have reasonably been foreseen at the time A force majeure clause is a contractual provision that frees the contract was concluded. If an affected party manages to parties of liability for non-performance if an unexpected prove these requirements, it shall be relieved from the liability external circumstance beyond their control delays or limits of non-performance. a party’s ability to fulfill their contractual obligations. A force UNIDROIT principles give the party awaiting the performance majeure event can be any accident out of the affected party’s the right to terminate the contract if the performance was time control: either an Act of God (hurricane, flood, earthquake, or fact essential. It also prescribes the option of postponing etc.) or Act of Man (war, strike, riot, etc.) which makes the the performance of failed obligations with no liability until the performance of obligations impossible. situation is resolved. However, force majeure is not a magic wand that an affected party can wave at any contractual obligation that becomes • International Chamber of Commerce (ICC) model overly burdensome. The effectiveness of the force majeure contracts
17 in focus
To identify whether the force majeure clause applies to circumstances arising from COVID-19, parties should firstly check whether the definition of a force majeure event given in legislation embraces terminology such as ‘infectious disease’, ‘epidemic’, ‘pandemic’ or similar. As already highlighted, the Azerbaijani Civil Code lacks a definition of ‘irresistible force’, and furthermore, the definition of force majeure prescribed in the Azerbaijani Customs Code does not cover the case of a pandemic. Having no legal grounds to qualify COVID-19 as a force-major/ irresistible force, one can either refer to article 448.4 of the Civil Code that provides exemption from liability for a breach of contract, or article 556.2 that provides for the termination of a contract due to the impossibility of performance. To qualify for these exemptions, the party seeking to apply them must Along with general wording for force majeure clauses such prove the following three criteria: as definition, notification and consequences, ICC also provides in-depth solutions on non-performance caused by 1. COVID-19 was unforeseeable upon entering into the presumed force majeure events, such as inter alia, temporary contract impediment, duty to mitigate and unjust enrichment. Parties Pandemics are events that are difficult to foresee. Parties to a contract that opt for the implementation of ICC clauses concluding agreements in November 2019 could not have can incorporate them in full or adapt them to their needs. predicted that a contagious diseases would spread across the Hence, consideration of COVID-19 as a force majeure and world. Moreover, the trigger point must also be linked to the its legal consequences will depend entirely on the wording specific obligation that has been affected, since the obligation parties included in the contract, unless an imperative norm perhaps could have been fulfilled at the time COVID-19 was exists in the governing laws. declared a pandemic, but may later become impossible due to government restrictions. For instance, a contract for (B) When contracts are silent, let the laws speak hosting MMA Fights signed in January 2020 when the world If parties are looking to contracts for potential excuses for was aware of COVID-19 only becomes non-implementable non-performance and find them conspicuously silent on the once borders have been closed and restrictions on social issue, then a solution should be sought out in the governing gatherings have been enacted by a particular state. laws of the contract. Unfortunately, there is very little jurisprudence on the legal 2. Impediments caused by COVID-19 are beyond its concept of force majeure in Azerbaijan. control The Azerbaijani Civil Code positions a force majeure as an The pandemic announced by World Health Organization and ‘irresistible force’ but lacks a definition of ‘irresistible force’ government measures to prevent the spread of the disease and elements that invoke it. The application of ‘irresistible can be recognized as events beyond the control of the affected force’ as a general defense is prescribed only with respect to party, since by nature such events are not attributable to the specific obligations under a limited array of agreements (sale affected party i.e. cannot be avoided or overcome. and purchase, storage, freight, agent agreements, etc.). Concerning liability for non-performance, the Civil Code exempts the party at fault from liability for a breach of a contractual obligation if the affected party proves that: (ı) the failure to perform was not attributed to parties, (ıı) the case was unforeseeable upon conclusion of the contract, and (ııı) it was impossible to avoid or eliminate this case or its consequences. Furthermore, it should be noted that force majeure is not activated automatically, the affected party must issue a notice once it becomes aware of an impediment. Is COVID-19 an irresistible force? As with most legal issues, there’s no one-size-fits-all answer as the effect of impediments caused by the pandemic on contractual obligations will depend on the factual matrix behind the agreement.
18 Issue 37 in focus
3. COVID-19 has made the performance of obligations caused by economic reasons, since sales fluctuations are impossible typical in a rapidly changing business environment. Not all contracts and not all obligations under the contract Thus, to direct the contractual issues onto the right path, parties will be deemed as affected by the pandemic. It is important to a contract should consider the provisions of applicable that parties or the court hearing the case establishes a causal laws, contractual formalization of the force majeure clause, tie between COVID-19 and inability to perform. The party and the most importantly, the causal connection between the claiming the benefit of a liability exemption clause must prove pandemic and difficulty/impossibility of performance. that the delay or non-performance of contractual obligation is sufficiently impacted by COVID-19 and its effects could have not been avoided by appropriate measures, for instance via Key Takeways remote delivery, using non-prohibited means of transportation, Gaps in local civil legislation, poorly drafted force majeure through the engagement of alternative suppliers, etc. clauses and limited court practice related to the unprecedented If all three criteria above are met and proven, the affected case of a pandemic make dealing with the sobering reality party can be exempted from liability for non-performance, and of COVID-19 more difficult and present a daunting obstacle if further execution of obligations remains impossible or de course for parties seeking to protect their businesses. trop, the contract can be terminated. Modernizing civil laws by codifying force majeure and the similar concepts of impossibility and frustration would certainly pull businesses out of operational and legal uncertainty. Until Does COVID-19 Frustrate the Contract? such reforms have been initiated, counterparties should What if a contract does not contain a force majeure clause attempt to negotiate mutually agreeable options and diffuse and the impossibility defense fails as the performance of potential disputes. obligations under the contract is still possible? For those who wish to close deals as COVID-19 continues Another potential defense for a party finding it difficult to fulfill to unfold, our recommendation is to enhance contracts with its contractual obligations due to the circumstances caused a well-considered force majeure clause that encompasses a by the pandemic would be frustration of purpose (significant comprehensive description of events, notice requirements and change in circumstances). Frustration arises when an available relief. Replicating model clauses and the principles unexpected intervening event, through no fault of either party, of international laws will add a ‘lifebuoy’ effect and create a so significantly alters the core of the contract, that it would relative advantage over contracts governed by national laws. be unfair to hold the parties liable to the severe contractual Only comprehensive and careful consideration of contractual terms in light of the new circumstances. For such cases, terms will avail businesses to properly position themselves the Azerbaijani Civil Code suggests either termination of the and build resilience against the challenges brought about by contract or reconsideration of its initially agreed terms. COVID-19. On this point, the Constitutional Court of the Republic of Azerbaijan (Decision of the Plenum of the Constitutional Court dated 07.09.2018) clarified that significant changes in circumstances must be distinguished from an irresistible force (force majeure). Thus, while a force majeure makes it impossible to perform contractual obligations, a significant change in circumstances puts the performance under extremely difficult conditions, but does not preclude their performance. A significant change in circumstances shall mean a change in the economic, legal and other factors beyond the control of parties that did not exist in the country when the contract was concluded. Stemming from the decision of the Azerbaijani Constitutional Court, even drastic market fluctuations due to conventional economic shifts are not likely to result in a contract being Author's biography frustrated. However, if the impact of a pandemic alters the Ms. Bahar Kavuzova is a Legal Manager at Deloitte in character of contractual obligations, for instance, in the event Azerbaijan. She has over 10 years of professional experience of government-imposed limitations preventing travel or trade, both in public and private sectors. Specialized mainly in energy, it is possible that the contract could be considered frustrated. maritime and FMCG, she consulted national and multinational The intention of travel agency to reconsider the terms of lease companies in complex corporate, maritime, customs, contractual agreement due to travel restrictions caused by COVID-19 will matters. probably be considered as frustration of contract by the court, Bahar graduated from Baku State University majoring in Law, since it becomes pointless to keep the leased space while following which she completed a course of Energy Law at business is unable to operate. The ruling could go the other Aristotle University of Thessaloniki. Currently she continues her way if the justification is built on a significant decline in sales studies at Chicago Kent College of Law toward her LLM degree.
19 in focus
SOCAR AQS Continues to Operate in Special Regime
Sabina Akbarova preventive measures to protect the health of employees Head of Public Relations, working in all work sites, their family members, partner companies, including clients, contractors and subcontractors. SOCAR AQS SOCAR AQS won’t leave its elder employees and those in need of special care and their family members in such a challenging time and implements all the necessary measures for their social isolation and provision with special sensitivity. Sanitary-epidemiological situation is strictly monitored in SOCAR AQS continues its initiatives with full support of work sites, thermal imagers are utilized at the entrances, recommendations made by H.E. President Ilham Aliyev, on and workers are provided with protective masks. Hand business entities to demonstrate social solidarity in order to disinfection stations have been installed in all work sites, prevent the spread of the Coronavirus (COVID-19) disease awareness-raising video instructions and posters have been and to protect the health of citizens in the country. developed and communicated to each staff member to avoid SOCAR AQS transferred 1.5 million manats to the Coronavirus being infected with coronavirus, and adequate disinfection Response Fund that was established as per the decree activities are carried out on a regular basis in all work and signed by the President Ilham Aliyev on 19 March to reinforce non-work sites operated by the company. the combat of the coronavirus pandemic in order to minimize the impact of severe fluctuations in the world markets on population, macroeconomic stability, employment and the Quarantine regime applied for employees business entities. The companies under NEGSOL Holding of Production Supply Bases that SOCAR AQS is also part of, has transferred a total of A quarantine regime has been applied to the employees 5 million manats, including 1.5 million funds transferred by working in the Bulla, Umid and Mayak Supply Production SOCAR AQS, to the corresponding Fund. Bases owned by SOCAR AQS. Employees of all three Production Supply Bases have been provided with hotel Necessary measures taken within accommodation under no home-leave condition. During the the framework of Corporate Social quarantine period, the company provides employees with food three times a day, and transportation to hotel and work, Responsibility strategy as well as appropriate clothing, gloves, masks and other Moreover, SOCAR AQS employees took the initiative to accessories. purchase large quantities of protective masks, thermal imagers, sanitizers and devices, test kits and artificial respiratory apparatus aimed at fighting the spread of the coronavirus and provided them to appropriate bodies. Necessary measures guided by the global experience in the framework of the SOCAR AQS’s Corporate Social Responsibility Strategy have been implemented since February aimed at fighting and preventing the spread of Coronavirus (COVID-19) disease in accordance with the guidelines of the World Health Organization, as well as the Ministry of Health and the Task Force under the Cabinet of Ministers of the Republic of Azerbaijan. A special Working Group established A Working Group has been established at the company to reinforce and monitor the implementation of the measures taken against the coronavirus pandemic. At present, SOCAR AQS carries out awareness-raising and
20 Issue 37 in focus
Company employees, as well as famous people in Azerbaijan have voluntarily joined the motivational flash mob and supported our people and oil workers. Natig Rhythm Group, Khayyam Nisanov, Abbas Bagirov, Gulyanaq Mammadova, Bilal Aliyev, Nasib Nur, Nuray Rahman, Akbar Rahman and others have taken part in the flash mob up to date. #Add power to our force from home! motivational videos are being broadcast through SOCAR AQS’s social media channels. Social media audience has been sympathetic to the motivational support of celebrities. Dozens of people have supported the flash mob by sharing the videos on their personal pages. #Thank you! A new social campaign has been launched under this hashtag. The Hotline launched Within the scope of the campaign, SOCAR AQS would like A “Hotline” has been set up to establish an effective to seize this opportunity to express its acknowledgement to coordination, appropriate means of transport have been the representatives of the medical facilities, law enforcement arranged to transfer employees to their workplaces safely, agencies, oil and gas industries and others who are at work, home-based work mode has been applied for office workers as well as to the company staff who do their best to make to curb the spread of the disease, and measures have been contribution to the economy of the country and welfare of the taken to shift to the new mode of operation at workplaces, people during the special quarantine period. Messages of and overseas business trips of workers have been suspended thanks accompanied by the #Thank you hashtag are posted temporarily. All internal and external meetings are held online on company’s corporate email, as well as social media by means of modern technologies. channels. Online communication and awareness- #We are stronger together! raising activities realized SOCAR AQS took the initiative to develop several videos SOCAR AQS’s corporate online radio has been launched to under this slogan. Videos have been communicated to the enhance communication, unity and motivation amongst our public through different informational channels. Videos, production workers working at different geographical locations awareness-raising and motivating in nature, gained sympathy and our home-based office workers in this challenging period. of the public. Video training sessions to develop the knowledge and skills, SOCAR AQS contributes to the statewide and nationwide and webinars on various topics to protect physical and measures being taken in response to the complex challenge psychological health of employees are deployed. faced around the globe and in the country, and carries out its mission with dignity. SOCAR AQS supported virtual hackathon Author’s biography Ms. Sabina Akbarova, head of Public Relations Department clamors around the world of “SOCAR AQS”, has worked in Marketing, Public relations Combating coronavirus calamity around the world is underway and Media sector for many years. She has also worked as in virtual environment as well. In view of it, in partnership with director of “ACT Azerbaijan”, Representative Office of “ACT SOCAR AQS, the Ministry of Transport, Communication and Global” International Company specialized in Marketing, Public High Technologies of Azerbaijan, and the United Nations relations and Advertisement consulting sphere within 10 years. Development Programme and SUP.VC organized a global Previously, she has also worked as Public Relations Manager virtual hackathon on 10-12 April 2020 to crowdsource tech and Press secretary in “Social Protection Development Project” solutions to help people cope with the coronavirus pandemic. jointly implemented by World Bank and Ministry of Labor and More than 600 participants from 45 countries joined the Social Protection of the Population. competition. There were representatives of the UK and Before that she has worked for Media where she worked as Germany from Europe, India and Kazakhstan from Asia, correspondent and editor for ANS, Lider and Ictimai TV. Australia, Brazil from the American continent, Egypt and Sabina Akbarova has received her bachelor degree in Journalism Nigeria from Africa among the participants. Faculty from Baku State University and Master’s Degree in International Journalism from the same university. Then she received her second Master’s degree in Media Administration #Add power to our force from home! at Georgian Institute of Public Affairs. She has also attended SOCAR AQS has launched an online motivational flash mob retraining / advanced training courses in Germany and Czech with the #Add power to our force from home! hashtag. Republic.
21 member contribution
Risk Management Through Bloomberg Terminal
Aydin Garayev globe. Because of the fast-growing economy, many changes and improvements may be missed and ignored. Despite this, we Market Risk specialist, have to adjust our models and calculations as frequently as we PASHA Bank OJSC can. It is necessary to determine the main flows of information which must be considered for the initial analysis in the trading, but prior to this, we must specify what kind of investments we primarily planned to view. The following indicators should be taken as leading measurement tools for risk management The modern world is ever more generally: market rates, diversified portfolio, liquidity, correlation among sub- advanced and progressive, with the portfolios, convexity, benchmark tracing, hedging opportunities, risk of loss and financial networks requiring frequent others. updates through accelerated data adjustments in the models and Market rates. Fixed-income investment is influenced by market rates in an inverse business decision processes. Due to relationship. Therefore, by estimating the market rate we can forecast our potential the special features of the Bloomberg gain from the trade. At least 8 market rate changes per year are distributed by Terminal (BT) and its instruments, their probabilities along with the FED meeting dates. These probabilities collect all Bloomberg linked models massive volumes of information across the world and are analyzed by Bloomberg automatically take the required data professionals, who provide the exact prediction without any deviations. in a few seconds. BT, however, is not just a data acquisition tool, and offers plenty of implementations not only from a trading point of view, but also a risk management perspective. By optimizing routine reporting and modeling, every company maximizes the effectiveness of their employees and allows employees to focus on analytical issues rather than repetitive and low-value tasks. Moreover, regardless of the model you use, BT always offers the best practice Liquidity of a security. How can we evaluate the liquidity of a single security by version to optimize the outcome. In this means of BT? Due to daily trade volume information, we can analyze the liquidity article, I will present BT’s advantages power of a security. In addition to the daily expected volume data, the BT offers in the risk management sphere. I will liquidity cost change in case of a change in volume. In this manner, we can calculate also suggest how BT can be used to an exit position cost of the security. Furthermore, in order to figure out the certainty, create a competitive edge, because the BT shares probability levels of volume changes. Uncertainty columns express any biased or lagged information may the reverse side of the probability and that level assumes liquidity horizon. cause a wrong decision, but the BT enables you to gauge end-of-day and intraday risk levels with precision. It is universally believed that globalization is a force that shapes our contemporary world, affecting business, the environment and of course financial markets. Suppliers, corporations, and consumers are becoming progressively more linked by information, material, and capital flows, as production processes become increasingly dispersed around the
22 Issue 37 member contribution
Correlation. Correlation metrics measure the relationship between dependent and potential amount of loss and approve independent variables, which consequently explain the direction of the connection. this VaR loss amount as a stop loss Positive, negative and non-related correlations can lead you to determine the final limit to exit the position in case of data as a result of changes in independent variables. The regression formula solves a breach. Calculation of VaR is a this issue and displays a clear picture of the relationship. Due to the BT, beta, alpha complicated process and the historical (intercept) and R-squared indicators of regression are defined through massive data price list must be provided as a source. and calculation. Besides, standard error of beta and alpha are also mentioned to Moreover, portfolio VaR requires extra clarify the effectiveness of correlation. By applying the BT’s correlation tool, we can correlation and variance matrices to get an exact picture of the relationship between variables and forecast a security complete the portfolio VaR calculation. performance (example profit or loss) based on the performance of a selected Instead of conducting this level of security or benchmark. sophisticated work, we can set an exact portfolio at BT (we just need ISIN and face value data), split the portfolio into different categories based on maturity, quality, category or regions, and receive VaR for the portfolio and sub-portfolios simultaneously. The facilitation of such a time-consuming process allows for the automation of routine executed works, removes calculation biases and, as a result, hold and sell decisions (from a risk point of view) become greatly beneficial. Hedging. Hedging is another method of insurance. This protection method, which In summary, risk management is grants security from the market, credit and operational risk, motivates investors responsible for fulfilling various to become more secure. An additional service of BT consists in providing several necessary targets, and indeed, types of hedge selection techniques, hedging ratios and hedge amounts. Successful Bloomberg Terminal has been hedging gives the trader protection against price changes, inflation, currency designed to ease the task and to exchange rate changes, interest rate changes and so on. Futures and options are accelerate models used daily. This a very good short-term risk-minimizing strategy for long-term traders and investors. article covers the core part for starting In virtue of the hedging system, an estimated loss can be protected by the amount Risk Management analysis at BT, of gap. however more detailed security portfolio management through the best practice will be shared in the next article. By improving risk management levels in the security portfolio scope, we can gain significant benefits aside from the liquidity management. Furthermore, risk management procedures and policies have to be prepared to complete the qualitative part of proceedings, and to be delivered properly.
Risk of loss. The quantitative expected loss of a security is measured through the Value at Risk (VaR) measurement. Due to the VaR metric, we can determine the Author's biography Mr. Aydin Garayev is a Market Risk specialist at PASHA Bank OJSC. He is simultaneously specialized in Bloomberg Terminal from a risk management point of view. Aydin carries 5 years of banking experience in strategy planning, project management and risk management spheres. Mr. Garayev is a PhD student and researching “Industrial Economics, Monetary Economics and Development” at Institute for Scientific Research on Economic Reforms.
23 member contribution
VAT Undergoes Another Beating
Jalil Ahmadov the enforcement of this term. It is interesting to also note that despite the order passed by CFE, LL.M., Esq. the President of Azerbaijan in 2016 to introduce the so called Tax Leader, Ensis Law Firm “general anti-avoidance rules”2 (to combat the tax evasion) in line with the international standards, these rules are still to come. That said, arguably the notion of “transaction without commodity” seems to portray certain hallmarks of the GAAR. Again, the GAAR are nothing new and are widely adopted In this tax bite, I’d like to dissect an interesting, yet across many jurisdictions, but further guidance by the tax somewhat potentially alarming (for taxpayers), amendments authorities and restraint will be required to adopt this notion to introduced into the Tax Code around the Value Added Tax fight the genuine cases of tax evasion. (VAT). As a general remark, despite manifold calls by the business community to reduce the magnitude of changes or amendments effected each year, the Tax Code continues to experience major developments that cast into doubt the stability of the tax legislation which is unsettling for businesses as it seems in a state of constant flux. Now, one of the most notorious amendments – that piqued my particular interest – is the introduction of a novel term “transaction without commodity”1 in the context of a definition given to “risky taxpayers” which seem to encase malignant VAT evaders, among others. For years, the tax authorities vehemently pursued taxpayers deemed as VAT evaders by blocking electronic VAT accounts, depriving them of input VAT entitlement and barring any tax deductions (Art. 13.2.81., 109.9., 175.11., TC). Alas, the authorities have ultimately succeeded in embedding this practice now formally in the legislation. This amendment will likely animate and amplify the efforts of the tax authorities to go after VAT evaders, however, we have seen in practice that this technique has unintended consequences where the authorities can often go beyond and above in its application by harming non-evaders alike. A case in point, the European Court of Human Rights (ECHR) have in two separate cases ruled that the denial of entrepreneur’s right to deduct input VAT is illegal and in violation of the rights on protection of property. Unfortunately, this has not hindered our local courts to continue to rule in favor of the legislator Author’s biography which – in my view - is a missed opportunity to demonstrate to Mr. Jalil Ahmadov is a certified attorney specialized in legal the international and local business community that the rule and tax aspects of doing business in Azerbaijan. Previously of law is sacred. a civil servant, Jalil had taken up various roles with growing To be clear, tax evasion is undeniably bad and illegal, and responsibilities at the Ministry of Taxes where he led teams depending on the degree of its sophistication tax authorities supporting taxpayers, contributed to tax policy developments, across the world employ various methods (including tax audit practice and helped his department bolster litigation doctrines such as “sham transaction”, “business purpose”, activities. With an ample tax and legal experience, Jalil later “substance over form”, etc.) that will grant a broad latitude to joined private practice helping his clients navigate through the tax authorities. Yet in the absence of additional technical varying facets of domestic or cross-border tax issues, and guidance; furthermore, given the courts’ track record to manage court representations and litigation cases on behest. sidestep the ECHR decisions it is hardly comforting to see He is a Certified Fraud Examiner.
1. It is not entirely clear whether this is an attempt by the authorities to interpose international 2. General Anti-Avoidance Rule (GAAR) is an anti-avoidance measure, generally statute based, known doctrines as “sham transaction” or “substance over form” which may be warranted if only providing of general application to combat situations of perceived tax avoidance. IBFD International supplemented by further guidance. Tax Glossary.
24 Issue 37 member contribution
What Hat Will We Wear During the Crisis?
Dr. Rafael Pampillon Director of Economic Analysis at IE Business School
What measures should be adopted to address the coronavirus crisis, and with what perspective? The economic consequences of the virus, like those of a natural catastrophe, are a tsunami that will impact the health of all citizens and the dynamics of the productive apparatus. Factories will close, broken production chains will need to be mended, and the price of assets—particularly stocks—will plummet. What should be done in the short and medium term? The stock and real-estate markets are experiencing a strong What can the authorities do? correction that will have various consequences. First, the First, the solution to the current crisis must involve aggregate poverty effect will drive down household consumption, supply-side policies: relaxing labor regulations, encouraging especially of durable goods. Second, the loss of asset value remote work, promoting the fourth industrial revolution, will make it harder for companies to secure financing. Third, opening up international trade, etc. In parallel, it will be as a consequence of the aforementioned factors, business necessary to apply expansionary monetary and fiscal policies: owners will become significantly less confident of their ability increasing credit, postponing tax deadlines for companies to turn a profit and will consequently scale back investments. affected by the crisis, and increasing public investment in This contraction of the demand for consumption and infrastructure and renewable energy sources. investment, in tandem with a sharp drop in oil prices, will lead In short, if we adopt the right economic policy measures, it to a considerable decrease in inflation and economic growth seems likely that towards the end of this year, the judge will worldwide over the coming months. not be wearing a black hat after all. Episodes of uncertainty will wane, markets will recover, the global economy will be growing enough to bring unemployment down, and millions of The worst possible scenario? people will continue to emerge from poverty. Never say that Is this a “black hat” scenario? In the olden days of the United things were always better in the past. The future will be better. Kingdom, if a judge wore a black hat, it traditionally meant that the accused was going to receive a death sentence. In Author’s biography these times of unease and uncertainty, it may be worthwhile Dr. Rafael Pampillon - With more than a hundred articles to visualize approaches that highlight the threats hanging published in specialized scientific journals, Professor Rafael over the world economy, but also the strengths that play into Pampillón combines his intensive research activity with that of the economic prospects for the remainder of the year. This is knowledge dissemination. Voted best professor at IE in 2001 the only way to figure out what hat the judge will be wearing. and 2008, throughout his twenty-five years in the world of In the short term, until contagion slows down and a vaccine education, he has dedicated his efforts to country analysis and is approved, consumers and business owners will be facing economic environment. His deep knowledge of these fields in high levels of uncertainty. Experience shows that once panic Latin America and Asia has resulted in his being appointed takes hold, a certain amount of time must pass before people a member of the board of a consultation committee set up change their behavior and the trend can be reversed. by the Spanish government for the privatization of public Some degree of economic recovery can therefore be expected companies (he represented Spain at the Ibero American in the medium term. The catalysts driving the change of trend Privatization Summit in 1997) and, for four years, he formed will be, first of all, a decrease in the number of infections over part of the board of the Spanish government’s Committee for the coming weeks or months; secondly, a decrease in asset International Cooperation for Development, in his capacity prices to levels indicating an economic recession; and thirdly, as an expert. a decrease in attention paid to news about COVID-19, as Dr. Pampillon carries PhD in Economics and Management, tends to happen in all crises driven by natural causes. Universidad de Barcelona (Spain).
25 AmCham Azerbaijan About Us The American Chamber of Commerce in Azerbaijan (AmCham Azerbaijan) is a leading private, non-profit business association supporting and promoting the interests of foreign and local businesses in Azerbaijan.
Established in 1996, the Chamber is Being one of the largest and the most Travel, Tourism & Hospitality, Corporate composed of around 250 Members influential organizations in the country Social Responsibility, Healthcare & and Associates active in every sector AmCham provides the best networking Medical Insurance, Legal & Compliance, of the Azerbaijani economy. AmCham opportunities. Other membership benefits FMCG and Procurement to make a real Azerbaijan represents nearly 80% include access to the data on the latest contribution to the future of business of all foreign investment, as well as a tendencies in the market (through such in Azerbaijan); Member-to-Member significant portion of local investment, information resources as Annual National Discount Program offers; U.S. Business in Azerbaijan. Through its 8 industry Employee Salary Surveys, Quarterly Visa Facilitation Program benefits etc. sector committees and 2 working Inflation Surveys, AmCham White Papers, groups, Members and Associates are AmCham Annual Reports, IMPACT Notably, the delegation of AmCham had able to share information, raise issues of Azerbaijan Quarterly Magazines); chance a privilege to meet with the President of common concern and propose possible to be heard and influence (Member Azerbaijan, H.E. Ilham Aliyev, in 2016. solutions. AmCham Azerbaijan remains Companies represent themselves Besides, the organization has established the most influential Access, Advocacy in committees in the areas of Tax & fruitful dialogue and keeps on cooperating and Advisory services provider in Customs, Banking, Finance & Insurance, successfully with government institutions Azerbaijan serving the improvement of Human Resources & Labor, Information on the highest level the business climate in the country. & Communications Technologies,
26 Issue 37 AmCham Azerbaijan
Business Events AmCham Annual General Meeting (AGM) 2020 The election season approached AmCham Azerbaijan! Voting for the vacant seats at the Board of Directors took place at the Annual General Meeting (AGM) of the Chamber on February 27. We had a slate of 6 candidates running for 4 vacant positions on the Board (out of 10). Through the anonymous voting process, in which authorized representatives of AmCham Member Companies in good standing took part, the following Board members were elected for a 2-year term:
5. Mr. Teymur Mahmudov – Deputy Head of Investments Division of SOCAR, Board Director of SOCAR- PETROFAC JV 6. Mr. Rufat Hajialibayov – General Manager, SAP Azerbaijan
We congratulate the new Board members and wish our Board of Directors a successful year ahead!
1. Mrs. Teyba Gouliyeva – Head of Central Asia and Caucasus Region, Societe Generale Banking Group 2. Mr. Nuran Kerimov – Managing Partner, Deloitte Azerbaijan 3. Mr. Movlan Pashayev – Managing Partner, PwC Azerbaijan 4. Mr. Shahin Mammadov – Deputy CEO, Business Support Director at “PASHA Holding” LLC
The current Board members who will remain on the Board for a second year are: 1. Mr. Ilgar Veliyev – Country Managing Partner, EY Azerbaijan 2. Mr. Bakhtiyar Akhundov – Vice President and Country Manager, Chevron Khazar Ltd 3. Mrs. Nargiz Nasrullayeva-Muduroglu – Director of Business Operations, Landmark Business Center 4. Mr. Ilgar Mehti – Managing Partner, Ekvita
27 AmCham Azerbaijan
AmCham President at Joint Event “Meet Your Candidate” Cocktail organized by SME Agency and the Local Reception Mission of the USAID On February 18, a partnership event to support business and professional associations in Azerbaijan was held in Baku, jointly organized by Azerbaijan’s Agency for the Development of Small and Medium-sized Enterprises (SME Agency) and the local mission of the United States Agency for International Development (USAID). The goal of the initiative is to develop partnership on joint tasks among the public, private sectors and civil society, as well as to focus on organizing business partnership, as well as on activities of business associations in this direction. The event was attended by representatives of government agencies, international organizations, business associations and civil society institutions. President of AmCham Azerbaijan Mr. Nuran Kerimov also delivered a speech in opening session of the event. On February 12, 2020, as a good annual tradition, AmCham “Meet Your Candidate” Cocktail Reception took place. It is the time of the business year when AmCham community comes together to meet our candidates running for the vacant seats at AmCham Board of Directors. This year, four (4) out of ten (10) Board positions are vacant. The candidates running for the elections to AmCham Board of Directors (still, we are open to more nominations) delivered their platform speeches: 1. Mrs. Teyba Gouliyeva – Head of Central Asia and Caucasus Region at Societe Generale Banking Group 2. Mr. Natig Hajiyev – President at ADA University Foundation 3. Mr. Nuran Kerimov – Managing Partner at Deloitte Azerbaijan 4. Mr. Shahin Mammadov – Deputy CEO, Business Support Director at “PASHA Holding” LLC 5. Mr. Movlan Pashayev – Managing Partner at PwC Azerbaijan Mr. Kerimov expressed his gratitude to USAID and the The elections themselves takes place at the Annual General SME Agency for organization of the conference and stated Meeting. that AmCham Azerbaijan is always ready to support such important initiatives. He stressed that the initiative will encourage the creation of a consortium among business entities, public unions, business associations and NGOs which also will lead to development of public-private dialogue too. Also, he informed that Azerbaijani government accepts big number of proposals from AmCham’s White Paper document which is the biggest policy paper of the Chamber publish in every two years. “If young businessmen want to create any associations, we invite them to cooperate. We can share our experience and we’re not competing here, but serving the same purpose,” Mr. Kerimov noted. AmCham President also emphasized that the Chamber is closely cooperating with other business associations operating in the country and looking forward to new and fruitful cooperation opportunities.
28 Issue 37 AmCham Azerbaijan
Amcham Members’ Luncheon 29 January On January 29, AmCham Azerbaijan hosted another members’ luncheon. The honorable Guest Speaker of this month – Mr. Ulvi Mehdiyev, Chairman of the State Agency for Public Service and Social Innovations under the President of the Republic of Azerbaijan, spoke on the activities aimed at improving this sector in the country and the issues remaining high on its agenda. He informed the participants about the history and
It was noted that significant progress has been made in ensuring effective public administration through the establishment of ASAN Service in terms of transparency and application of modern innovations. They also discussed various social and innovative projects, activities in the field of e-government and future plans. Representatives of AMCHAM expressed their gratitude for the fruitful meeting and the importance of these discussions with business sector representatives. The event featured presentations on the activities and services of several member companies.
goals of the ASAN service, its activities and future plans. Mr. Mehdiyev shared that the total number of appeals to the ASAN service centers was over 36 million, or more than 6 million unique individuals.
29 AmCham Azerbaijan
9 December Mr. Huseynov started his speech talking about the mission and goals of the Migration Service. He noted that the main On December 9, 2019, the American Chamber of Commerce priority of the migration policy in the country is to ensure in Azerbaijan (AmCham Azerbaijan) hosted last luncheon for the benefit of all parties – both public and private, as well the year of 2019. as foreigners and citizens. To this end, the focus is on improving the regulatory framework, ensuring accessibility, transparency, efficiency and quality of services and the use of innovations. Proposals of the Advisory Council are taken into consideration when improving the regulatory framework and services. In particular, the organization of business forums, business lunches and meetings contribute to achieving success in this area.
The Head of the Service said that the State Migration Service had the highest result on the ASAN service index for the last two years (68.98% and 83.81%). Then, Mr. Huseynov answered questions and requests raised by the audience. Representatives of AMCHAM expressed their gratitude for The honorable Guest Speaker of this month – Mr. Vusal the fruitful meeting and the importance of SMS management Huseynov, Chief of State Migration Service of the Republic of to such business discussions with business sector Azerbaijan, spoke on activities aimed at improving this sector representatives. in the country and the issues remaining high on its agenda. The event featured presentations on the activities and Around hundred AmCham members and partners attended services of several member companies. the event, including representatives of diplomatic corps.
30 Issue 37 AmCham Azerbaijan
Committee Highlights THT Committee Meeting On January 15, AmCham THT Committee hosted its first meeting of 2020. Mr. Aykut Korkmaz, Chairman of THT Committee, opened the meeting by welcoming the audience and announcing the speaker as well as the agenda of the meeting. The meeting was held in the format of informative presentation and interactive discussion with Azerbaijan Tourism Board (ATB) representatives. Mr. Florian Sengstschmid, CEO of ATB opened the presentation highlighting key achievements of 2019 and sharing the milestones for 2020. Azerbaijan visitor statistics and destination survey results, focusing on visitors’ challenges and priorities were shared with the members and were actively discussed. Key strategy of ATB was shared and main points were touched, some of them being institutional framework, research and statistics, innovation and technology, legal and taxes, infrastructure, etc. gratitude for the warm welcome and proceeded with his presentation, which was dedicated to ISO 37001:2016 Anti- bribery management systems. ISO 37001:2016 specify requirements and provide guidance for establishing, implementing, maintaining, reviewing, and improving an anti- bribery management system. It includes a series of measures and controls that represent global anti-bribery good practice. The requirements of ISO 37001:2016 are generic and are intended to apply to all organizations (or parts of an organization), regardless of type, size, and nature of the activity, and whether in the public, private, or not-for-profit sectors. Mr. Gashamov talked about how the standard can benefit the development of ethical and compliant business culture in Azerbaijan. Ms. Pirgasimova supplemented Mr. Gashamov’s presentation with Ethics & Compliance processes that can be established with an organization to give effect to its undertakings under ISO 37001:2016. Then, Ms. Sevinj Novruzova, from Nobel Oil delivered her Ms. Fidan Aliyeva, Head of Marketing department of ATB, presentation. She spoke about exposure to corruption highlighted some brand marketing updates, as well as risk and its impact to financial and reputation losses from tourism experience and product development. Presentation is fraudulent conduct or unethical behavior of third parties. i.e. followed by Q&A session where participants had a chance to their suppliers, distributors, agents, consultants, joint-venture address their questions and concerns to ATB representatives. partners or any individual or entity that has some form of Finally, Mr. Aykut Korkmaz thanked everyone for participation business relationships with the organization. Ms. Novruzova and a very productive and fruitful discussion. reiterated the importance of taking active steps to ensure that potential corruption risks flowing from these relationships are Legal & Compliance Committee Meeting responsibly evaluated and managed. On December 24, 2019, AmCham Azerbaijan’s Legal & Compliance Committee hosted its regular meeting. Mr. Vagif Procurement Working Group meeting Ahmadov, Chair of the Legal & Compliance Committee opened On December 18, 2019, AmCham Procurement WG held a the meeting by welcoming participants and announcing the meeting on Data and its contribution to procurement efficiency agenda. and reporting. Then, he introduced the guest speakers, Mr. Fuad Gashamov Meeting started with the speech of Mrs. Natavan Mammadova, and Ms. Esmira Pirgasimova from Ekvita, and Ms. Sevinj (then) Executive Director of AmCham Azerbaijan, who Novruzova from Nobel Oil. thanked all participants and guests for taking the time to After introducing himself, Mr. Gashamov expressed his participate the AmCham PWG Meeting. She highlighted and
31 AmCham Azerbaijan
rated PWG’s efforts in 2019 and announced that the PWG will Then, Mr. Teymur Ordukhanov, Technical Director at Smart become a Procurement Committee effective January 2020. Solutions, revealed: Then, Mr. Kanan Tabasaranskiy, Chair/Moderator PWG, • An extensive practice of Smart Solutions in preparation shared the results of activity of AmCham PWG. With support of Master Data before ERP implementation, introduced of PWG and due to its active procurement focused work, they the major pain points of Master Data, how to resolve achieved productive outcomes ranging from the Creation them by ERP implementation and automation; and Implementation of E-Procurement Platform for Public • Digitalization challenges – what difficulties should be Procurement, prepared and represented Position Paper, and resolved to digitalization challenges to achieve the introduced 65 amendments in Public Procurement Law. He digitalization; also gave brief information about the plans for the year 2020. • Key points for success of the procurement process Afterwards, Mr. Murad Rzayev, Product & Services Section automation. Procurement Manager at Azercell, presented a quick review At the end, Mr. Goshkar Hasanov, CPO at Azerconnect, of Supply Chain Management process, and opportunities briefed on a real example, based on his own and his team’s of SCM analytics, aggregation and parameters of demand experience, how to monitor the Procurement performance, planning and about the importance of accuracy in a warehouse indirect procurement statistics and sourcing, savings and operation, inventory procedure. related statistics.
AmCham Digital Technology and Innovations Committee On January 28, AmCham Digital Technology and Innovation Committee hosted its first meeting in 2020. Ms. Kamilla Shakhbazov, Chairperson of the Committee, opened the meeting by welcoming members and wished everyone happy and prosperous year. Then, she summarized the activities in 2019, emphasized on topics that were covered and suggested members to be more active and propose new topics for discussions on committee meetings. The main topic of the meeting was dedicated to the Position Paper on GDPR and its reflection to Azerbaijan technology market. GDPR covers not only the legal scope of the Next panel speaker, Mr. Farhad Parvizi, Bloom Group Advisory Circle, touched upon the topics, such as “The death of Supply Chain Management”, shared detailed information about the “Artificial Intelligent”, demand forecasting perspectives, bid evaluation, evaluation methodologies and about the prevention of fraud in procurement. Mr. Anar Rustamov, Consultant at Smart Solutions, familiarized the participants with the Data Leadership, the trend in Business strategy (Data strategy), how to increase cost-effectiveness, improve efficiency/transparency and foster profitable growth.
organization and compliance issues, but also affects the departments responsible for information technology, data security and information management. DT&I committee invited specialists on this area – Ms. Amina Bakhshiyeva from Deloitte and Mr. Nail Akhundzade from Ekvita – to discuss these issues.
During the discussion, members of committee proposed the following recommendations:
32 Issue 37 AmCham Azerbaijan
were discussed at the committee meetings during 2019. She mentioned that the topics would be expanded and invited participants to propose a discussion topic that would be included in 2020 program. It was then requested to propose topics for recommendations on Position papers. It was suggested to include GDPR in the position paper and recommend the government to adopt this regulation to the local legislation in order to synchronize Azerbaijani business with EU. It was proposed to discuss issues in the field of GDPR with the Tax Committee, as well as clarify the implementation of tax cuts for start-ups. Mr. Gachay Mirzoyev, Microsoft representative, suggested to add interesting topics into the next year’s program. We agreed to collect all suggestions, circulate within the committee • In the paragraph of fines, it was proposed to indicate members and choose the most demanded topics for including the existence of special courts judging on GDPR related to the next year program. Mr. Mirzoyev shared a document cases. of the transition to cloud technologies prepared by KPMG for • As a recommendation, it was proposed that the MLC Kazakhstan. should be used to utilize the resources of National Data Ms. Shakhbazov proposed to contact KPMG Azerbaijan office Center in an international perspective and attract users and discuss the possibility to develop the same document for from abroad. Azerbaijan. • Include neighboring countries adopted GDPR. At the end of the meeting, Ms. Shakhbazov asked from • Set fines for the violation based on economic realities of participants to be more active in 2020 and take initiatives to Azerbaijan. improve the business climate in the field of digital technologies and innovations. As a result of the discussion it was agreed: • To accept all recommendations and comments to the main document. • Updated document will be sent to approval of AmCham Board Members. • Approved document will be added to the Position Paper and submitted to the government. At the end Ms. Shakhbazov informed the participants about upcoming program for Q1.
On December 17, 2019, AmCham Digital Technology and Innovation Committee hosted its monthly meeting. Ms. Kamilla Shakhbazov, Chairperson of the Committee, opened the meeting by welcoming participants and announcing the agenda. The meeting was dedicated to the discussion of position paper and overview of 2019. Ms. Shakhbazov informed the audience about the topics that Joint HR and SD&CI Committee Meeting Role of HR in promoting inclusive and sustainable workplaces On December 20, 2019 AmCham’s Sustainable Development and Corporate Impact and Human Resources Committees held a joint workshop for HR representatives on the role of HR in promoting inclusive and sustainable workplaces. The main topic of the workshop was inclusivity, owing to the fact that for organizations to survive and thrive in today’s complex, diverse and global environment, it is essential to attain a competitive advantage when the human resources are concerned. To hire and retain top-performing employees, one key differentiator is having an open and inclusive work culture. Working towards a diverse and inclusive workforce can be challenging, and therefore the workshop focused on practical solutions on how to transform the workplace, inclusive leadership and inclusive practices.
33 AmCham Azerbaijan
Human Resources Committee Meeting On January 30, AmCham HR Committee meeting on a very popular and highly demanded topic – “HR in VUCA world” was organized. Mrs. Ellada Alishova, HR Committee Deputy Chair, shared committee plan of sessions for 2020 and introduced first guest speaker Ms. Ziba Mustafayeva, HR Director at Azercell Telecom LLC. Ms. Mustafayeva delivered a presentation on the impact of VUCA on HR and made brief introduction about what is VUCA and informed about VUCA impact on jobs as well as business world. During the presentation, she also mentioned about VUCA Implications on HR and changing role of HR in VUCA world.
The workshop started with an opening speech by the Chairwoman of HR Committee – Elnara Mammadova, who highlighted the importance of inclusivity concept to accommodate future generations of employees. The first speakers – EY’s HR Director in Azerbaijan – Samira Shabanova and EY’s Diversity and Inclusiveness Director for MENA – Irada Aghamaliyeva, discussed the role of HR in the future of work and sustainable leadership behaviors. Shams Mustafayeva – UN Development Coordination Officer, spoke about UN’s Women Empowerment Principles and provided practical tips on how to promote gender equality in the workplace. Bahar Kavuzova – Legal Manager at Deloitte, delivered a presentation on the local legislation regarding employment of people with disabilities and gender equality. Then, next speaker – Ms. Gunay Aliyeva, HR Advisor at BP, One of the major topics of the workshop was neurodiversity shared specific information on HR in VUCA world: workforce and particularly people on the autism spectrum. Ayten of the future. Based on PwC report of “Workforce of the future: Eynalova – Founder of “Birge ve Saglam” public union and the competing forces shaping 2030”, she explained what Farah Mammadli, Senior Consultant at EY – spoke about makes VUCA world VUCA and four worlds of work in 2030. neurodiversity and employment options for people with She also had a chance to talk about people management challenges in 2030. The event was held in a format of discussion; participants were in touch with speakers sharing their experience and finding answers to their questions.
neurodiversity. They discussed the specific characteristics of the autism spectrum that make people on the spectrum an attractive workforce, such as extraordinary mathematical and technological abilities and being extremely detail-oriented. The last speaker was Nargiz Tarverdiyeva – Program Manager at Baku Higher Oil School, who spoke about her own experience about hiring an employee with a disability. The workshop was concluded by Chairwoman of Sustainable Development and Corporate Impact Committee – Gunel Farajova.
34 Issue 37 AmCham Azerbaijan
AmCham Legal Update
Azerbaijan introduces special sanitary regime in some • Methodological guidelines for preventing COVID-19 spheres of economy coronavirus infection in catering; The Cabinet of Ministers of Azerbaijan issued a resolution • Methodological guidelines for preventing COVID-19 on regulating the sanitary situation in Azerbaijan during the coronavirus infection in the tourism sector and hotels; special quarantine regime. The document was adopted with • Methodological guidelines for preventing COVID-19 the aim to continue implementing measures taken to prevent coronavirus infection in public transport; the spread of COVID-19 in the country. During the period • Methodological guidelines for preventing COVID-19 of the special quarantine regime declared in Azerbaijan to coronavirus infection in structures that receive citizens; prevent the spread of COVID-19, the special sanitary regime • Methodological guidelines for preventing COVID-19 has been introduced for the following activities: coronavirus infection in various fields of trade and • food trade; services, and office work. • catering; • tourism and hotels; The list of conditions for permission to foreigners, • public transport; stateless persons for temporary residence has been • activities of structures engaged in the reception of extended citizens; According to the amendment to the Migration Code, the right • trade and services, office work. for temporary residence in Azerbaijan will also be granted to foreigners and stateless persons who receive professional In accordance with the requirements of Article 3 of Azerbaijani education in the country. Currently, article 45.1.9 covers Law on Sanitary and Epidemiological Well-Being, the following the condition of the case of full-time education in general methodical guidelines shall be approved by the chief state educational institutions and in higher and secondary special sanitary doctor of Azerbaijan: educational institutions of Azerbaijan. • Methodological guidelines for preventing COVID-19 The amendment to the Code was adopted in the third reading coronavirus infection at enterprises engaged in the sale of the Milli Majlis. of food products (wholesale and retail sales, markets, fairs);
35 AmCham Azerbaijan
Special quarantine regime is extended until • The activity of legal entities and individuals rendering the May 31, 2020 services to other business entities or providing with work According to the information of the Operational Headquarters in different spheres and whose activity was limited during under the Cabinet of Ministers (“the OH”), the special the special quarantine regime will be restored; quarantine regime has been extended in Azerbaijan until • The activity of private retail facilities in all spheres, as well 00:00, May 31, 2020 taking into account the current sanitary as activity of hairdressers, beauty salons and cosmetic and epidemiological situation in the country in connection services will be restored. with COVID-19, preventive measures which are used in other countries, as well as recommendations of the World Health In accordance with the rules of quarantine regime, more than Organization. 10 people are banned to gather in public places, boulevards, At the same time, given the rate of infection among the parks and catering facilities throughout the country during the population and the dynamics of patients’ recovery, a decision special quarantine regime. The suspension of the lessons was made to mitigate a number of restrictions in Baku, in all educational institutions of the country will be extended Sumgayit, Ganja, Lankaran cities, Absheron and other until May 31, 2020. The movement of people is allowed in regions: Baku, Sumgayit, Ganja, Lankaran cities and Absheron district • The activity of a fixed number of employees of state after the employer enters the information about the employee institutions will be resumed (the number of employees of involved in the spheres in which the restrictions have been state institutions whose activity has been resumed will be lifted (by using an electronic signature) into www.icaze.e-gov. determined upon the relevant resolution of the Cabinet of az. During the pandemic, the activity of relevant structures Ministers of the Azerbaijan Republic) in Baku, Sumgayit, in the country, as well as trade and services sector, must be Ganja and Lankaran cities, and Absheron region from carried out in accordance with the rules of social behavior and 00:00 May 4th; sanitary and epidemiological rules indicated by the OH. • DOST centers will resume the activity to render the The OH urges everyone to observe the rules of personal targeted state social assistance and issue the bank hygiene, as well as medical and preventive measures, to cards in the social sphere; leave the houses in case of necessity, to less contact with • The activity of legal entities and individuals that provide other people in public places, to support the measures being other business entities with work and render the services implemented by the state, to comply with the requirements in various fields of activity in which restrictions are applied and recommendations of the OH. Depending on the sanitary- during the special quarantine regime will be resumed; epidemiological situation, at the next stage, a decision will • The activity of individual retail facilities in all spheres, be made to remove another part of the existing restrictions. as well as activity of hairdressers, beauty salons and The sanitary and epidemiological situation associated with cosmetic services will be resumed. COVID-19 in the country is regularly analyzed and the relevant rules are applied. For this reason, taking into account The following restrictions will be lifted from 00:00 on May the further dynamics of infection with COVID-19 and the 4, 2020 in all other cities and regions of Azerbaijan and situation in the country, the special quarantine regime may be Nakhchivan Autonomous Republic with the exception of re-announced in case of necessity. Baku, Sumgayit, Ganja, Lankaran cities and the Absheron region: Amendments to the Rules of conducting transactions in • The system of leaving the house upon SMS notification, foreign currency registration on the www.icaze.e-gov.az website on the The Central Bank of Azerbaijan approved amendments to the basis of an official certificate or a reference from the “Rules of conducting transactions of residents of the Republic place of work will be eliminated in all other cities and of Azerbaijan in foreign currency as well as non-residents in districts of the country and the Nakhchivan Autonomous national and foreign currency” on February 20, 2020. Republic from 00:00 on May 4, 2020; According to the amendments, in case of advance payment • DOST centers rendering the services in certain territories for imports of goods, the deadline for provision of customs will restore the work to render the targeted state social declaration confirming the importation of goods or submission assistance and issue the bank cards in the social sphere; of documents confirming the delivery of imported services to • The activity of employees of state structures will be fully the authorized bank has been extended up to 2 years from restored; 270 days. At the same time, in case the cost of non-imported • The services will be rendered to the clients in restaurants, goods and services does not exceed the limit of $ 10,000, the cafes and teahouses (except for the use of hookahs in requirement to inform the currency control authority that has public catering facilities); been removed. • Visits to boulevards, parks and recreation areas will not be restricted; Rules on refund of VAT paid for goods by individual • The intercity and interdistrict trips will be restored (except consumers have been approved for passenger transportation services in public transport) “Rules for refund of VAT paid by individuals for purchased in the mentioned territories; goods from entities engaged in retail trade or catering services
36 Issue 37 AmCham Azerbaijan
in Azerbaijan (except for oil and gas products)” (“Rules”) of the state duty as provided under the Law of the Republic of have been approved by the Decree of the President of the Azerbaijan “On State Duty”: Republic of Azerbaijan dated March 21, 2020. According to • extension for 30 days – AZN 15 for minors, AZN 30 for the Rules, individuals who paid VAT for purchased goods others, from entities engaged in retail trade or catering services in • extension for 60 days – AZN 30 for minors, AZN 60 for Azerbaijan will be able to receive refund of such VAT via others. transfer in accordance with the defined procedures. It shall be noted that, refund will be carried out via transfer to the In order to extend the period of temporary stay in the country, consumers’ bank card (or bank account). If the consumer is it is necessary to pay a state fee. Payment can be made a foreigner or a stateless person, VAT will be refunded only if electronically through the Government Payment Portal, the such individual have a bank card (or account) in Azerbaijan “ASAN payment” system and through Expresspay terminals Manat. For such purpose individual consumer shall complete by obtaining a payment number through the “Follow the registration on the portal – the special information base for application” section on the website of the SMS. Payment VAT refund. Consumer should submit an application for a numbers will be posted on the website of the SMS within VAT refund by entering information on the cash register 2 days. There is no need to collect physical decisions on receipt or POS-terminal extract to the Portal within 90 extension of the stay. In this regard, foreigners are advised days from the issuance of the cash register receipt. The not to approach the reception offices of the SMS. application received on the Portal is activated within 14 days after the date of issuance of the cash register receipt. After The main directions of state support for persons review by the State Tax Service the respective information is affected by the COVID-19 transferred to the authorized bank. Individual consumers are On April 1, 2020, the Ministry of Economy of the Republic entitled to receive 15% of VAT paid cashless and 10% of VAT of Azerbaijan presented a base document on programs in paid in cash to their bank accounts within 30 days from the connection with provision of state support to various sectors date of submission of the application to the Portal. Moreover, of the economy affected by the COVID-19, as well as the Rules also define procedures for return of the purchased entrepreneurship and population. goods by consumers after the refund of VAT amount. In such The base document includes support programs in 10 directions case the amount to be paid to the consumers for the returned and areas. These programs are aimed at maintaining the jobs goods will be reduced in the amount of the refunded VAT. of employees in areas affected by pandemic and supporting entrepreneurship subjects (including individual and micro- Amendments to the Law on Health Insurance enterprises) in the current situation. The base document The Parliament of Azerbaijan adopted Amendments to the envisages preliminary information on the main directions and Law on Health Insurance on 30 March 2020. Based on these scope of the following support programs with total volume of amendments: 2.5 billion manat: • Implementation of compulsory health insurance for 1. Financial support for payment of the salaries of 304 administrative territorial units will be finalized in 2021, thousand employees. The program will cover the previously implementation should have been finalized in following areas affected by the pandemic: 2020; • Industry - 78.8 thousand employees • Collection of compulsory health insurance premiums will • Trade - 106.4 thousand employees start from January 1, 2021 instead of April 1, 2020; • Service - 87 thousand employees • Accordingly the period of application of the 50% • Transport - 7.8 thousand employees exemption to compulsory health insurance premiums • Other - 24.6 thousand employees for non-oil and gas and nonpublic sector will be applied during the period of January 1, 2021-January 1, 2022 2. Financial support to 292 thousand individual (micro) instead of the period of April 1, 2020-January 1, 2021 entrepreneurs. The program aims to protect working envisaged earlier. places in areas affected by the pandemic. 3. Program of tax benefits, privileges and holidays for The need for foreigners to apply for registration at the entrepreneurship subjects operating in the areas place of stay has been eliminated affected by the pandemic. The program also provides the According to the information provided by the State Migration following tax benefits and exemptions: Service of the Republic of Azerbaijan (“the SMS”) dated March • Provision of simplified tax exemptions to micro 26, 2020, applications of foreigners on registration upon place entrepreneurship subjects for the respective period of stay, whose current registration expires within March 16-24 • Fixed-term exemptions from property and land taxes and who are not able to leave the country shall be considered • Exemptions from profit (income) tax in the respective accepted by the SMS. Applications of foreigners whose stay amount and for the respective period in the country expires within the period from March 24, 2020 • Exemption from simplified or income tax for those to April 30, 2020 are considered accepted by the SMS and the engaged in catering activities validity of their stay in the country will be subject to payment • Deduction of donations transferred to the Fund to Support
37 AmCham Azerbaijan
Fight Against Coronavirus for profit (income) purposes areas affected by the pandemic (in order not to reduce • Exemption of some taxpayers from VAT for the respective the number of workplaces); period • Providing financial support to individual (micro) • Exemption from current tax payments for the respective entrepreneurs operating in areas affected by the period for the areas for which benefits will be applied pandemic (in order not to reduce workplaces - as the • Extension of the deadline for payment of profit (income) main criteria for taxpayers who paid taxes in 2019, tax according to the results of 2019; and etc. compulsory state social insurance and unemployment 4. Credit-guarantee support program for newly issued insurance); bank loans for entrepreneurs. The program is designed • Consideration of capital and property amnesty in the for entrepreneurs operating in areas affected by the country in order to expand financial sources of economic pandemic and has a budget in the amount of 0.5 billion growth and investment. manat. The program provides for a state guarantee for 60% of newly issued loans in the amount of 500 million 2. Granting tax incentives for protection of economic manat (provided that the maximum interest rate is not activity: more than 15%, the loan term is up to 3 years) and Provision of the tax benefits to business entities (including subsidy from the state budget for half of the interest on small and medium enterprises) operating in areas affected by guaranteed loans (7% of 15%). the pandemic: 5. Credit-guarantee support program for entrepreneurs on the existing loan portfolio. The program is designed • granting temporary exemption from simplified tax for for entrepreneurs operating in areas affected by the micro entrepreneurship entities; pandemic and applied to loans worth 1 billion manat • granting temporary exemptions from property and land without state guarantees. taxes; 6. Social package to support the financial situation of the • provision of taxpayers with temporary exemptions on population. The program provides for the allocation of profit (income) tax and simplified tax; funds for social support (unemployment benefits, social • temporary exemption from current tax payments on profit support, etc.). (income) and property tax; 7. Support program to pay tuition fee of the students from • extension of submission of reports on micro- socially vulnerable families. entrepreneurship entities (income, profit, property and 8. Financial support program for mortgage and credit simplified tax) and tax payment period; guarantee mechanism. • prolongation of payment of taxes on the areas of 9. Program to support on utility payments for electricity economic activity affected by the pandemic; consumption of the population. Program provides for • temporary exemption from VAT on imports of certain a temporary increase the limit of preferential use of types of products necessary for food and medical needs electricity for the population in the amount of 100 kWh. of the population; 10. A program to support vital areas of passenger transport. • exemption from VAT on import of raw materials and materials related to the production of certain types of Action Plan on a number of measures to reduce the products in order to meet the needs of the population for negative impact of the COVID-19 food, medicine and other necessary products in a short On April 4, 2020, Prime Minister of the Republic of Azerbaijan time; Mr. Ali Asadov signed the order to approve the “Action Plan • deduction of expenses from income for necessary on the implementation of paragraph 10.2 of Azerbaijani preventive measures, including disinfection, carried out President’s Order #1950 dated March 19, 2020 “On a number by the taxpayer in order to prevent the epidemic and of measures to reduce the negative impact of the coronavirus protect the life and health of the population; (COVID-19) pandemic and, consequently, sharp fluctuations • granting exemptions on taxes applicable to rental fees; in world energy and stock markets on the economy of the • deferral of calculation of interest on unpaid taxes, Republic of Azerbaijan, macroeconomic stability, employment compulsory state social insurance and unemployment and entrepreneurship.”” insurance fees for a certain period of time; • reducing the social insurance burden of a number of The Action Plan covers three spheres: business entities. I. Economic growth and support for entrepreneurship; II. Support for employment and social welfare; 3. Implementation of additional support measures in the III. Macroeconomic and financial stability. areas of activity affected by the pandemic: • Non-calculation of rental fees paid by business entities Below you may get acquainted with the extract from actions (including small and medium entrepreneurs) that leased envisaged in the Action Plan. state property and suffered as a result of the pandemic 1. For protection of workplaces and social stability: by the end of 2020; • Partly payment of employees’ salaries working in the • Non-calculation of rental fees paid by entrepreneurs
38 Issue 37 AmCham Azerbaijan
(including small and medium entrepreneurs) who leased legislation and ensuring daily control in order to prevent land belonging to the state land fund and suffered as a unjustified dismissals and lay-off of employees in the result of the pandemic by the end of 2020; private sector. • Non-calculation of rental fees of residents operating in industrial areas affected by the pandemic until the end 6. For macroeconomic and financial stability: of 2020; • Development of a macroeconomic policy framework that • Taking measures in the following areas to increase and reflects the new economic realities; stimulate the export of non-oil products: • Expansion of the sterilization portfolio depending on the • inclusion in the Tax Code of the mechanism of sale of monetary situation; goods used in international practice with export note • Issuance of a regulations exemption to credit institutions (provided that the payment of taxes is provided by bank in order to regulate the obligations of entrepreneurs guarantee and other methods in case of non-export of operating in areas affected by the pandemic during the goods) in order to increase interest in the export of non- quarantine regime; oil products; • Taking comprehensive measures and strengthening • application of customs duty exemptions on the relevant control over the movement of capital and increasing the list in order to increase the competitiveness of local efficiency of the currency regime. production areas dependent on imported and non-locally produced raw materials and intermediate goods; In this regard, the official website of the Ministry of Economy • taking measures to stimulate the use of special customs of the Republic of Azerbaijan has announced the mechanism procedures internally by entrepreneurs; for providing financial support to entrepreneurs affected by • Implementation of the following measures in order to fully the COVID-19. The actions are to be implemented in three and uninterruptedly provide the population with relevant stages. The following are going to be initial measures put in products necessary for food and medical needs and action: imported into the country: • temporary reduction of import duties on products deemed • Partial payment of salaries of employees working under necessary to “0” level; employment contracts in order to prevent the number of • Extraordinary (accelerated) application of customs job reductions in the areas affected by the pandemic - clearance, control and issuance of permits (certificates) part of the salary and the corresponding social insurance during the import of products deemed necessary; contributions to be paid to employees will be transferred • To take additional measures to support small and to employers’ bank accounts. Compensation amount will medium enterprises in order to purchase local products not exceed the average monthly salary (AZN 712) for (goods and services) in public procurement; employees with income higher than the average monthly • Elimination of fees paid by professional participants of salary; the banking and insurance market to the financial market • Providing financial support to individual (micro) supervisory authority. entrepreneurs - this financial support applies to taxpayers who paid taxes, compulsory state social insurance 4. Implementation of urgent measures in the execution of contributions and unemployment insurance contributions the new model of economic growth in the post-pandemic in 2019, and the allocated funds will be transferred to period: the bank accounts of such individual entrepreneurs. If the Maintaining the rate of economic growth and employment amount of payment of the individual (micro) entrepreneur through the expansion of domestic demand, identification to the state budget in 2019 was less than AZN 250, of the following areas of activity as the main priorities of the financial support will be set in the amount of AZN 250. state economic policy in the medium term in order to create new jobs, state support for the development of these areas Applications for the financial support shall be submitted and encouragement of attracting private investment: through the taxpayers’ electronic cabinet within the Internet • construction sector; Tax Office. • mining industry; Additionally, with the Decree dated 7 April 2020 the Cabinet • petrochemical industry; of Ministers of the Republic of Azerbaijan has approved • digital economy; “Conditions and procedure for payment of lump sum amounts • transport, trade and logistics; to persons registered as unemployed due to the application • telecommunications; of a special quarantine regime during the COVID-19.” The • agriculture and processing industry; decision envisages a lump sum payment of AZN 190 per month • domestic tourism. to persons registered as unemployed in the “Employment” subsystem of the centralized electronic information system of 5. For protection of paid workers from unemployment risk in the Ministry of Labor and Social Protection of the Republic of the non-government sector: Azerbaijan during the special quarantine regime in connection • Carrying out work with the employers according to the with the COVID-19.
39 AmCham Azerbaijan
Member News TWI Makes Expertise Available in the Fight Against COVID-19 support both design engineering and manufacturing, offering a fast-track route to achieving throughput and yield, together with both online and offline NDT. TWI is already supporting some specialist small volume production companies in making parts to keep medical equipment operational. Here, our world-leading expertise in optimization of process sequences could have a critical impact on productivity – enabling increased throughput and yield to get medical supplies where they are needed in time. The message In these unprecedented times, many companies are rapidly is simple. If you are working in the fight against COVID-19 and gearing up to provide vital equipment and care products to you need technical support around materials, manufacturing the NHS. TWI is providing support to its Industrial Members methods or testing, TWI is available and ready to help. in this critical effort but, in addition, any company which is involved in this work can now access our expertise free of About TWI Ltd charge. A global leader in technology engineering providing We are already supporting industry in the development research and consultancy to both Individuals and Members. of ventilators, face-masks and hand sanitizer and talking Respected for its expertise, professionalism, impartiality and to our Industrial Members to ensure the work meets their confidentiality, TWI works with the most influential companies current needs, but our expertise is now available to any other worldwide across all industry sectors. companies or initiatives which may benefit. TWI has over 600 Industrial Members. We help these TWI is bringing its world class knowledge and facilities in companies by undertaking project work, training and materials, joining and assembly, and testing to bear on providing advise and consultancy in joining, engineering and challenges in developing new manufacturing methods at allied technologies. scale and speed. The best way to make medical products For more information www.twi-global.com will change when manufactured outside the conventional TWI Azerbaijan has been operating as a branch with its head medical sector, due to differences in equipment and skillsets office in Baku since June 2012, providing internationally available. TWI can support almost every joining technology, recognized courses and training, inspection, engineering, and together with cutting and other processing methods and our consultancy services across the Caspian Sea region. TWI expertise spans polymers, metals and ceramics and their Azerbaijan also has training agents in Kazakhstan, Russia, integration into assemblies. TWI’s expertise is available to Belarus, and Georgia. Alper Can Bulcum has been appointed as General Manager of JW Marriott Absheron Baku Alper Can Bulcum was to the InterContinental Almaty for his first General Manager welcomed as the new assignment, followed by GM positions at The Marmara General Manager of the JW Istanbul and Burjuman Arjaan Dubai by Rotana. Marriott Absheron Baku, Alper joined the Wyndham Hotel Group as General Manager effective December 23rd, at the Grand Istanbul Kalamis Marina in December 2011 and 2019. was promoted to Cluster General Manager for the Ramada Alper re-joins Marriott Plaza Jumeirah Beach Dubai and Ramada Sharjah two years International from San later. As a result of his great performance the hotel received Clemente Palace Kempinski an award of Hotel of the Year 2013, whereas in 2014 Alper Venice and brings with him was awarded as General Manager of the year for EMEAI over 30 years of hospitality region. In 2017 he took on a role of General Manager at experience. He grew his The St. Regis Istanbul. Under his leadership the hotel was career through positions awarded as Hotel of the year Luxury Brands Europe. in Sales & Marketing and Throughout his successful career, Alper has demonstrated Revenue Management at efficient leadership and people management skills with The Regent Almaty, Park Hyatt & Hyatt Regency Baku, The strong experience in managing multi-cultural teams across Ritz-Carlton, Istanbul and The Ritz-Carlton, Bahrain. As Italy, Turkey, United Arab Emirates, Kazakhstan, Bahrain and Director of Revenue Management he was part of the opening Azerbaijan. team at Madinat Jumeirah Dubai in 2004. In 2005 he moved
40 Issue 37 AmCham Azerbaijan
Azerbaijan International BIM Conference 2020
qualification exams after receiving 85 Certificates. “AZEL Systems” is also a partner of such world-famous companies as “Hexagon Intergraph”, “Trimble Tekla”, “Samsung”, “Dell EMC” and others. He noted the importance of digitalization for business processes optimization, increasing company productivity, reducing costs and improving customer experience. He also noted that Azerbaijani companies have achieved significant success in development and implementation of new technologies. For example, “Azfen” company using “Autodesk” technology has implemented important projects that won international recognition. At the end of his speech, Mr. Yakovenko noted how important it is in the modern world to use only licensed Autodesk software products that maintain stability and speed of the design process. He pointed out that when working with An international conference on Building Information Modelling serious projects, especially in cooperation with international (BIM) technologies has been held with organization of organizations, the use of pirated software is unacceptable. AUTODESK (USA) and AZEL Systems (Azerbaijan). This is due to the fact that for foreign partners an important The main aim of the conference was to analyze the existing factor in successful cooperation is compliance with the law problems in construction sector and their possible solutions and copyright. with the help of the latest “Autodesk” technologies, which The Next Regional Manager of “Autodesk” for six countries improve quality and effectiveness of the design work. The including Azerbaijan Gennadiy Molodetskiy made a conference also focused on the “Autodesk” solutions for the presentation on the topic “BIM technologies are unstoppable”. construction of civil and industrial facilities. In his speech Molodetskiy spoke about the global trends in In opening remarks, Advisor to the Chairman of the State BIM technologies and implementation of these technologies Committee for Urban Planning and Architecture, Mr. Aydin in the USA, the Great Britain and other CIS countries. He Karimov spoke about the importance of implementing new stressed that strong growth of Azerbaijan allows the country technologies in construction sector and stressed significance to successfully implement such technology. “BIM technologies of BIM technologies. He expressed hope for this event which are the future of construction” – summarized Molodetskiy. will help in further study of BIM technologies in Azerbaijan. Molodetskiy presented awards to the participants in the The Rector of Azerbaijan University of Architecture and presence of Aydin Karimov and professor Gulchohra Construction, professor Gulchohra Mammadova also noted Mammadova. First, the representative of “Azfen” received a the importance of the event. She spoke about success of certificate for his company’s achievements in implementing the University achieved in implementing and teaching the “Autodesk” technology in 2019. Next, the president of “AZEL latest technologies for construction. In particular, she noted Systems” Igor Yakovenko was officially awarded the only that in 2019 “Tekla Trimble” through “AZEL Systems” passed Gold Partner certificate of “Autodesk” in the Caucasus and 46 Tekla software licenses to the University free of charge the Central Asia. for educational purposes. The rector said that University is Autodesk’s assignment of the high status of AZEL Systems ready to further develop relations with “Autodesk” and “AZEL and taking to a new level of partnerships attests to the highly Systems”. efficient and close-knit work of the entire AZEL Systems team Next head of “AZEL Systems” Igor Yakovenko spoke about aimed to solve the main tasks - quality technical support, the company. He noted that company which was founded in as well as strengthening and expanding the business of 2013 is working on integration of advanced technologies and customers by reducing design and construction costs. is one of the leading Azerbaijani IT companies in development, Following a short break, conference continued with a deeper system integration, IT services and IT consulting. discussion of the BIM technologies. In particular, “Autodesk” “AZEL Systems” is currently the only Autodesk Gold Partner technical experts spoke about the use of such technologies in the Caucasus and the Central Asia. This status indicates in construction of metro in China and Belarus, data center of that “AZEL Systems” has the necessary qualifications for “Facebook” company in the USA, Universities in Australia and the provision of consulting services and it is an expert in residential building in the USA. Additionally, it was noted that integration of Autodesk software. Igor Yakovenko also noted with the help of BIM technologies architects and engineers that to obtain the Gold status, the technical specialists of located in the different parts of the planet can effectively “AZEL Systems” company passed special training as experts cooperate and work on the same project. in sales and integration, as well as successfully passed
41 AmCham Azerbaijan
Update from Iteca Caspian
Our partners and our entire team did everything possible to ensure that the exhibition would be held on schedule, but today we must admit that the only correct solution is to move the exhibition to 2021. We had thought to move to the Autumn, but we felt we did not want to add to what is an increasing crowded schedule. But most importantly, we did not want to break our 27-year tradition of welcoming the key players in Dear Friends, the international oil and gas community to the wonderful city On behalf of Iteca Caspian, and the Organizing Committee of of Baku in June. We look forward to continuing this tradition the Caspian Oil & Gas Exhibition and Conference (COG) and in June 2021. Caspian Power exhibition, let us express our gratitude to all Our decision has been welcomed by the supporting state of you for your support and understanding over the last few structures of Azerbaijan. Currently, the oil and gas industry months. and all of us must focus on human health, and on minimizing As many of you have expected, we regret to inform you that the consequences of the pandemic. the Exhibition and Conference will not take place this year, The new dates for Caspian Oil & Gas Exhibition and and we will start working immediately on COG 2021. This Conference and Caspian Power Exhibition, the most decision has been taken, due to the continuing situation with important oil and gas event in the region are June 1st-3rd coronavirus COVID-19. 2021. We look forward with great anticipation to this date, Since the first outbreak, we have been monitoring the and invite all interested companies and our partners to come situation in Azerbaijan and in the world. We follow all WHO together in Baku in June. recommendations and the legislation of the Republic of We wish you all success, prosperity, and most importantly Azerbaijan. The pandemic is undoubtedly a global catastrophe health to you and your families. that has affected the health of people and the health of the We are always in touch with you and see you in Caspian Oil world economy, including the oil industry. We have no doubt & Gas and Caspian Power 2021! that the measures taken by the Government of Azerbaijan and other countries are effective, and will allow business to Yours sincerely, return to its normal rhythm in the nearest future. Edward Strachan, Regional Director, Iteca Caspian AmCham Calendar of Events 18 December 1 December 2019 - 30 March 2020 Procurement Working Group meeting 17 December 27 February AmCham Digital Technology and Innovations Committee AmCham Annual General Meeting (AGM) 2020 Meeting 12 February 9 December “Meet Your Candidate” Cocktail Reception AmCham Members’ Luncheon 30 January 28 January Human Resources Committee Meeting AmCham Digital Technology and Innovations Committee 29 January 15 January AmCham Members’ Luncheon THT Committee Meeting 20 December 24 December Joint HR and SD&CI Committee Meeting Legal & Compliance Committee Meeting
42 Issue 37 AmCham Azerbaijan
25 Years Young!
Hyatt Regency Baku is celebrating its 25th Anniversary, as it was opened in May 1995 as the first international hotel brand entering Azerbaijan Hospitality Market. Later in 1999, Hyatt International Center was established, comprising of Hotel, Commercial, Office and Residential spaces, stand-alone Meeting and Conference Center, as well as Fitness Center & Spa on its premises. In 2016 Hyatt Regency Baku went through substantial upgrading further consolidating his Regency brand as a preferred choice for international corporate and leisure travelers, as well as small and medium-sized meetings and social events, looking for tranquil yet energizing experience. Naturally becoming the one of the founding members of AmCham, Hyatt Regency Baku has been making its that is incorporated in Hyatt’s Global Care & Cleanliness contribution to the improvement of the business climate in Commitment. Azerbaijan, by introducing international Hospitality standards This initiative includes detailed training at Hyatt hotels and growing industry professionals in the country. worldwide, complemented with an on-property hygiene Following the key Global brand purpose – “Caring for people manager and third-party auditing. You can depend on the so they can be their best”, Hyatt Team focuses on wellbeing Hyatt family using the latest research and innovation. of its guests and colleagues, such that they feel confident of a We are here to make sure your travel is free from stress and sanitary, safe and healthy environment in each Hyatt Globally filled with success.
43 AmCham Azerbaijan
44 Issue 37 PROFESSIONAL SERVICES INTERNET AND COMMUNICATIONS AZQTEL LLC
џ 20% discount for SkyPort Wireless Leased Line
SIAR RESEARCH AND CONSULTING GROUP OTHER AVIRTEL џ 10% discount on a number of services OFFICE SYSTEMS All AmCham members are entitled to: and projects џ 50% discount on connection of Toll Free Numbers!
џ 10% discount for office chairs џ 15% discount for hard furniture MEGA INSURANCE џ 40% discount for office partition Discounts for M2M Card џ 20% Voluntary property insurance BUREAU DE QUALITE џ 15% Voluntary motor insurance All AmCham members are entitled to: џ 35% Travel insurance џ 50% discount on connection of Toll Free Discounts for all employees of AmCham Numbers! Member Companies TWI Caspian Sea џ 15% Voluntary property insurance џ 10% Voluntary motor insurance џ ·10 % discount on training, certification, џ 30% Travel insurance and engineering services
EDUCATION SEABAK LLC џ up to 10% on IT Support Services џ FREE migration to CLOUD.AZ Services ASPI AGRO MMC џ up to 5% on IT Equipment, Cartridges and Software Licensing ADA UNIVERSITY џ 10% discount on beverages in Savalan џ up to 15% on Internet Services at Boutique Wine House LandMark and other business centers џ 10% on Executive Education Corporate Trainings Programs
SYNERGY GROUP џ 10% discount on ISMA Bikes PASHA INSURANCE Intern ational Facul ty џ 10% discount on Ganja International CITY Col lege. Hospital (Stomatology and For all employees of AmCham Member Physiotherapy are excluded) REPRESENTATIVE OFFICE OF THE Companies: џ 20% discount on Excelsior Hotel Shamkir џ 15% discount on voluntary insurance of UNIVERSITY OF SHEFFIELD property INTERNATIONAL FACULTY CITY COLLEGE џ 5% discount on voluntary motor џ 5% discount to all employees of insurance (CASCO) AmCham Member/Associate Companies For individual M2M Card holders: on Executive MBA Program џ 20% discount on voluntary insurance of property џ 10% discount on voluntary motor AUTOSTAR KAUKASUS GMBH AZERBAIJAN insurance (CASCO) џ 10% discount on all services at Mercedez – Benz Service Center
M2M Card Holders All Employees of AmCham Member Companies Card Type The amount of The duration of Card Type The amount of ANTARIS - OFFICE, BANK & discount the card discount SCHOOL SUPPLY VISA Infinite Free 3 years VISA Infinite Free џ 15% discount on products in Antaris MC World Elite Free 3 years MC World Elite Free shops American Express 50 % off 3 years American Express 50 % off џ 15% discount on products in Antaris Gold Gold branch in Baku Book Center American Express 50 % off 3 years American Express 50 % off *Discount cannot be applied in combination Platinum Platinum with any other promotion Continuing to support our communities
Build Your Future project Enabling 300 students from disadvantaged families in Garadagh, Kurdamir, Ujar, Aghdash, Yevlakh and Hajigabul to prepare for university exams
Sweet Gold project Establishing 530 beekeeping family businesses in Yevlakh, Samukh, Shamkir, Goranboy, Tovuz and Agstafa
Find out more at www.bp.com/azerbaijan