A Word from the Executive Director of AmCham Dear Readers,

The theme of this issue was not selected randomly. Over the Spring / Issue 9 last decade the city of Baku has seen a spectacular economic rise, as increasing oil prices brought strong economic growth Credits to Azerbaijan. The country's rapid rise can be seen in its GDP growth which quadrupled between 2000 and 2010. Editor-in-Chief: This growth and Baku's glimmering skyline, including the Nargiz Nasrullayeva-Muduroglu creations of world's leading architectural and construction Editor: firms, are seen as symbols of economic development and Emma Triller prosperity that many in the region have sought to emulate. Over the past few years the real estate sector is recording a Design & layout: booming growth and development and we would like to offer our readers an insight QuadroM Media Agency into this interesting trend. This issue includes an independent overview of the sector, Photographer: a brief on land administration and the new Construction Code as well as the number Huseyn of interviews with the city's most prominent real estate developers.

Articles contributed by: Do not miss the "About Us" section featuring a number of important CSR activities Arzu Geybullayeva we have been involved in over the last several months and of course the splendor Emma Triller and glamour of our 6th Annual Black&White Ball on p.46! Natalia Corobco Baker & McKenzie Deloitte Azerbaijan Kind Regards, Indian Clinic Nargiz Nasrullayeva-Muduroglu Salans

Advertisers: Aquavita-Taj Austrian Air Azerfon-Vodafone Editor’s Comment Deloitte Azerbaijan Garadagh Cement Dear Readers, Hill International Hyatt Hotels During my four years in Azerbaijan, I have been privileged to The Landmark Hotel witness the phenomenon of a city evolving before my very Mozaik LLC NJT Group eyes. In a very few years, Baku will be barely recognizable Nobel Oil as the city of oil barons’ mansions and Soviet architecture. A Pasha Construction glittering metropolis on the Caspian unfolds, home to some truly iconic buildings, new hotels, luxury office and retail Cover artwork: space. Quadro M Such rapid urban growth must pose some challenges to urban planning, so the establishment of infrastructure and Printing: Nurlar better access to data are essential if the real estate market is to be regulated and encouraged to grow. The adoption of a “one-stop shop” Publisher: mechanism in land administration will go a long way towards ensuring more efficient American Chamber of Commerce registration procedures, lower costs and better service for customers. in Azerbaijan It is also encouraging to note that many of the new developments are in conformity Tel: (+994 12) 497 13 33 with Azerbaijani and international construction codes and that environmentally Fax: (+994 12) 497 10 91 www.amchamaz.org friendly solutions are being implemented in a region that for years has suffered ecologically. Advertising opportunities: It is the sincere hope of many that the very real benefits of all these developments Please contact the Editor will be felt and enjoyed by the citizens of Azerbaijan, as the country welcomes a new Emma Triller era of reform and growth in the real estate sector. [email protected] Our sincere thanks to all of our advertisers and contributing editors for their support Tel: (+994 12) 497 13 33 of Impact Azerbaijan. The articles in IMPACT AZERBAIJAN express the opinions of the authors and Best wishes, do not necessarily reflect the position of Emma Triller the American Chamber of Commerce in Azerbaijan.

1 contents

Getting Real about 6 Great Expectations: Real Estate Price per m2 Rentals: (Price per Month): Residential: 480 to 7200 AZN Commercial properties (shops): An overview of developments in the real estate 10 to 120 AZN per sq. m and construction sector, by Arzu Geybullayeva. Offices and Business Centers: 9 A Landmark in Baku 25 to 60 AZN per sq.m The doyen of the real estate and construction sector in Azerbaijan, PURCHASES: Landmark owner Efruz Residential: Muduroglu looks back 500 to 5000 AZN on a career spanning Commercial: 50 years. 1200 to 30 000 AZN 12 Ariel Ivanier, UNECE, on Reforms in Land Administration Interview with the Secretary of the Working Party on Land Administration WPLA (UNECE) Ariel Ivanier on challenges facing Azerbaijan and reforms initiated by the government to regulate the real estate and construction sector.

14 Hill Comes of Age The Flame Towers will be Azerbaijan’s most successful showcase of its program to embrace western international standards of construction and living.

18 Promotion Feature AmCham member NJT shares its successes and strategies as the most reliable supplier of plastic products.

2 Spring / Issue 9 contents

IN FOCUS AMCHAM AZERBAIJAN 21 Cementing the Market: 37 About us Domestic producer invests in technology to boost capacity. Interview with Horia Adrian, the General Manager of market leader Garadagh Cement.

As a member of AmCham, your company 24 A Revolution in Retail has access to a vast network of business information and contacts. Park Bulvar brings the mall to Azerbaijan 39 Business Events as a ‘life experience’. What are Bakuvians getting out of this?

MEMBERS 27 Draft Construction Code A draft construction code has been introduced in Azerbaijan. Baker & 40 Committee Highlights McKenzie discusses the implications for 42 Members’ News and Events potential investors. 43 Projects

46 5th Annual Black and White Ball 30 A Clean Bill of Health Hind Klinikasi tells newcomers to Azerbaijan what they need to know about obtaining a health certificate.

32 Easy Leasing AmCham member Salans provides important information on the legal ramifications of commercial leasing in Azerbaijan.

34 Bilateral Tax Treaties A brief introduction to benefits to be gained from International Tax Treaties. 48 M2M Discount Program

3 in focus

New Members The American Chamber of Commerce is proud to announce that the number of our members has now exceeded 200. We would like to congratulate everybody on this achievement and say that we are committed to supporting our members in working together to build a strong future for business in Azerbaijan.

AECOM Baku LLC Caspian Region Oilfield Services Corp

Borusan Makina Servis ve Tic A.S Pasha Construction

Caspian Accounting ZQAN Holdinqs & Consulting Services Limited LLC

Capital Resources Bank VTB Advisors (Azerbaijan) OJSC

Relaz Consult and AMEC Crown Hotel Baku Services LLC

AREVA GROUP 1 Security RealGaz LLC

Caspian Crystal NORM LLC

The European Azerbaijan Society (Partner Organization)

4 Spring / Issue 9

in focus

Great Expectations: Overview of the Real Estate Sector

country’s door, the direction and the future of the market is Arzu Geybullayeva rather obscure. Regional freelance analyst, BA International Relations, MSc Global Politics An overview of the sector Overall, the real estate sector in Azerbaijan picked up pace in the early 2000s, when the country began to slowly reap the benefits of the incoming investment. According to Rena Baku, once the city of Alis and Ninos, small pathways, Akhundova, one co-founder of the Azerbaijan Association of oil barons and ordinary people, is now a booming capital Realtors and Managing Director of Caspian Property Services of construction, pricey real estate, luxury cars and (CPS), a local company providing real estate consultancy and boutiques- a city of wealth and stature. Often called the a range of other services, “in total, since 2000, in Baku and Monte Carlo of the Caspian, Baku is no doubt a great within the surrounding cities, 480 new residential complexes place to live if you are wealthy. Its future is guaranteed by with a total of 11,879,400 m.sq were built”. As the Association ‘black gold’ and its rapidly growing oil and gas industry of Realtors of Azerbaijan reports, at the end of 2009, the has turned the capital of this Islamic country into a number of registered residential units totaled 1,720,000 growing investment hub. overall. However, an additional 5% of illegal residential construction as well as the new construction units that have It is in this setting that the real estate market has became not been registered by the government should be added to Azerbaijan’s rapidly evolving non- energy sector. And yet, that general number. with its quickly expanding economy on one hand, tight government control over most of the sectors of the economy Nevertheless, as the financial crisis hit the world, it was also felt on the other, and financial crisis still knocking on the in Azerbaijan and in particular in the real estate sector. In fact,

6 Spring / Issue 9 in focus

as CPS reports, starting from the last quarter of 2008 and the Azerbaijanis living abroad. As the Central Bank of Azerbaijan beginning of 2009, it was really the beginning of a crisis year for reports, remittances declined by 16 percent between January Azerbaijan’s real estate market. From 2008, the construction and September 2009.1 sector decelerated as private demand for housing dropped and no new construction foundations were laid. “A sharp decrease Changes in costs of construction materials also had a in demand versus growing supply and the expense of new substantial impact. Prices for construction materials grew by constructions changed the structure of demand and supply in 19.8 percent in March of this year, which is a 13.1 percent disproportionate form”, says Rena Akhundova, adding, “One increase according to the prices listed last year.2 of the most serious problems in the market was limitation of sales in cash that most adversely affected property owners, Renting of property in Azerbaijan was also altered as a result construction companies and real estate companies”. of these small- scale crises. For instance, in comparison with February, in March 2010 the volume of housing rent decreased From September to November 2008 alone, apartment sales in by 19.2 percent, and by 19.6 percent in the first quarter of Baku fell by 20 percent, says Arif Garashov, head of the State this year. If in December of 2009, a total 220.9 thousand m.sq Real Estate Registration Service. In 2009, the percentage worth of property was rented out, in March 2010 it was only changed slightly, with most of the real estate sales decreasing 59.8 thousand m.sq.3 by 10 to 15 percent. In the first ten months of 2009, the cost of secondary housing was reduced by 14.1 percent and primary However, as experts argue, this whopping drop won’t continue housing by 18.5 percent. Prices on land plots dropped by 17.9 and prices are expected to get back to normal. In fact, they percent in comparison to the first quarter of the aforementioned expect a shift as of 2011, when the real estate market should year. Co-founder of the Azerbaijan Association of Realtors gradually pick up pace.4 and director of Consultancy Company “MBA- LTD” Nusret Ibragimov says that compared to the first quarter of 2008, in Ibragimov relates the imminent stabilization of the market to an 2009, the market continued to lose momentum, contracting expected increase of prices in the energy sector. “Since oil prices overall by an astonishing 40 percent. are growing, as of mid 2010 or in the first quarter of 2011, we will be looking at growth in the energy sector and as a result 2009 was a year of maximum loss in land sales as well. Rena an increase of prices in the real estate market. Following initial Akhundova argues that a series of shortcomings are accountable “symptoms” of growth in real estate, people will start purchasing for this. Overpriced land plots, existing problems with documentation property without waiting for another hike in prices, which will and unofficial disloyalty of credit organizations alienated this trigger activity within the market”. segment from the real estate market and affected prices saliently. In addition, “a sharp slowdown in the pace of construction works, Vafadar Akhundov, President of the Association of Realtors stagnation in operations of construction companies, reduction of agrees, adding that together with an increase of prices in the funds obtained for construction works and the diminished volume energy sector, other factors such as increased mortgage and of investments to this field affected the land market negatively.” mortgage financing by the state will have a substantial impact and might trigger positive change in the market. In addition, As noted in the research of the Public Association of Realtors, a new trend might be observed, says Akhundov, namely the average price of 1 m. sq of a plot in Baku is 147.7 USD, that some might consider the option of selling property in as of January 2010. The term for land exposition increased by installments ranging from 10 to 20 years, which will also have 0.4 percent to 253 days. The highest price was registered in a significant impact on the market and the prices. Nasimi district at 190,000 USD per 100 m. sq and the cheapest in the Absheron area, at 350USD per 100 m. sq in February of this year. What is missing

In addition to the financial crisis, the real estate market activity However, while hopes might be rising on Azerbaijan’s real estate was strongly affected by the drop in the volume of funds horizon, a series of major shortcomings exist. Azerbaijan’s flowing into the country i.e., money transfers. According to real estate market lacks real estate appraisers. Anyone can experts, approximately 70 to 80 percent of investments in call himself an appraiser without having proper knowledge of the market are made up of financial resources earned by the actual business. According to Nusret Ibragimov, currently

1 Ilaha Mamedil, Real estate market will continue to devaluate, http://regionplus.az/ru/articles/view/790 2 Trend Daily, Construction sector (first quarter of 2010), http://www.allbusiness.com/real-estate/real-estate-sector-performance-housing- market/14405466-1.html 3 A. Fatulla, Real estate market is ready for growth, http://www.zerkalo.az/2010-04-27/economics/8942p2-aif-stroimateriali-nedvigimost 4 Price on real estate in Azerbaijan might drop by another 12%, http://www.property.az/shownews.php?newsID=60&type=news&PHPSESSID =19e8258fe4db07aa8af1da953654524c 5 Exclusive interview, Baku’s population is growing, which means that the prices in the real estate market will be growing too, http://www. novosti.az/exclusive/20090130/42704769.html

7 in focus

there are 900 registered real estate agencies. In reality demolished. “They are giving me $1,500 USD per square meter. however, this number is much higher, especially when one How can I buy a new flat with this money? Yes, one can demolish takes into account individuals who call themselves brokers but a house, provided there is adequate compensation for it!” who have no education in this field. Ibragimov believes that this number is close to 6000 if not more.5 Residents’ complaints are left unanswered by the city's executive authorities. According to a lawyer with the Islam, Existing purchasing power is also an issue. According to the Democracy and Human Rights Center, the organization has public association of realtors as of February 2010, 1 m. sq of received over 300 complaints from just one residential district a residential unit costs an average of 880USD.6 More precise this year alone. Most of the complaints regarded misuse of data is provided by CPS, reporting that if one splits the capital property laws and violations of civilians' legal rights. into different zones7, downtown being the highest end and suburbs the lowest, then one is looking at a 4,000 to 30,000AZN Another persisting problem of the new all- purpose skyscrapers and 1,200 to 5,000AZN price range for 1 m. sq of commercial is that often they are built too close to one another or already property. And yet, despite such high prices, the occupancy is existing buildings, thus ruining the general aesthetic of the city. high, between 85 to 90 percent, according to CPS. However, Driving around, one might see a 15-storey high rise with one - to there is already a difference in prices of rent between months, as two-storey old residential blocks standing right next to it. This has for instance, in March 2010, prices and the rent for commercial drawn much criticism from local residents, who argue that such buildings in the capital dropped by 0.2 percent. Compared to the proximity is a violation of their privacy. In the meantime, a number previous quarter the prices actually decreased by 0.3 percent of old residential buildings have been torn down in order to acquire and compared to the same period last year by 3.9 percent. plots for new construction, disregarding their historical value.

Residential units in new apartment blocks range from 1,200- 5000 to 500-650AZN per 1 m. sq., bearing in mind that the Dream or reality average monthly nominal salary in Azerbaijan according to the State Statistical Committee in 2009 was 263.4AZN for state Once a Soviet country of box- like apartment buildings, Azerbaijan employees and 356.1AZN for non- state employees. is now a booming capital of luxury high- rise, all- purpose buildings. However, most of the investment and construction is taking place in the capital, with almost no expansion across Transformation the rural areas. The real estate market overall, and in particular residential buildings are not affordable for average Azerbaijani As a result of growing construction, the landscape of the capital residents even with the side- effects of the financial crisis. Urban has been transformed immensely. Currently, Baku resembles planning is non- existent with little attention and care given to the a basket of colorful mushrooms of different sizes and shapes overall layout of the city and its historical past. at best or simply one big construction site at worst. This is mostly because of non-existent urban planning. The new The chaotic construction boom might be an alternative to developments spring up chaotically, with little or no SWOT the energy sector. However, with its frenzied development, it (strengths, weaknesses, opportunities, threats) analysis. is unlikely that it will become a more long- term and stable sector. Despite predictions of experts for normalization of the As a result, hundreds if not thousands of residents have been market, as long as average citizen incomes remain low, ability evicted from their homes over recent years, homes that were to buy will also remain low. then demolished and replaced with skyscrapers or removed for highway expansions. One such case was observed in We are yet to witness an effective coping strategy of the government one of the districts of the capital, where the local executive and investors with the crisis, while ensuring compliance with codes authorities ordered demolition of around 50 illegal homes. of construction, and implementing urban development, zoning, Residents argue that when they bought this land they were SWOT analyses and other planning guidelines. Let us just hope given permission to build, while authorities argue that today, that while Azerbaijan continues its transformation to a glamorous these constructions are all illegal.8 metropolis, it only does it for the better.

Those residents who are evicted are also unhappy with the Impact Azerbaijan wishes to thank Caspian Property compensation provided by the authorities. “This is not a Services for their kind cooperation in providing data and government house, it is my own private property,” said one information for the article. resident living in the city center whose house was about to be www.cpsbaku.com

6 News on real estate market of Azerbaijan, Prices on primary residential market in Baku dropped by 0.3% in March, http://www.realestate- foreign.ru/news_azeri.php?id_article=114569 7 zone 1- downtown; zone 2- city surroundings; zone 3- around the center and the suburbs, 6 to 7km further from the downtown; 8 News on real estate market of Azerbaijan, A new wave of demolition of illegal houses began in Baku, http://www.realestate-foreign.ru/ news_azeri.php?id_article=109543

8 Spring / Issue 9 in focus

A Landmark in Baku Fifty five years and counting... The aptly named Landmark development is a familiar sight for Baku residents. But not many people know the man behind the building. Efruz Muduroglu began his career as a civil engineer in Turkish Cyprus and is considered a pioneer of the construction industry in his home country. He has been operating in Azerbaijan since the 90s. Here are his views, drawn from 55 years of experience in the business, in this exclusive interview with Impact Azerbaijan.

How has the real estate market developed over the last 5 years? In the real estate market in Baku, in the light of the big increase in volume during the first stage of the last five year period and the realization at the last stage of the same period that this trend will end up spoiling the city, there has been a considerable improvement in quality observed. It may also be considered that the World Economic Crisis has also, to a certain extent, contributed to bringing the situation under control even if with limited effect.

Has the position of investors been affected by the world economic crisis? Particularly after the World Economic Crisis there has been substantial change in the position of investors. Meanwhile, in achieving performance, securing finance has gained precedence over knowledge and experience. In Azerbaijan, this situation has been aggravated by the fact that credit interests are very high. From now on, investors will consist of those who may be able to benefit more easily from the limited possibilities at the banks and also perhaps partly of state organizations. Offices ...... 12 500 m2 Some external banks who have come to the country or are in the Retail 600 m2 course of coming here and are, probably because of high interest Residential ...... 610 m2 rates, wishing to use the possibilities at their disposal in Azerbaijan, Leisure space ...... 15 800 m2 may be widening these possibilities for investors somewhat. The financing of the Hilton Hotel construction by the “Yapi Kredi In our opinion, the position of Landmark Office and Hotel Bank” jointly owned by the Koc Group and Unicredit and, as we Complex compares well. We believe that the Landmark I, which understand it, the market investigation here by Turkey’s “Is Bank” was our first job, has contributed to the implementation in the may be given as examples supporting this thesis. country of construction complying with European and American standards and the establishment of this as local practice. We How much space is on offer at Landmark? How do are of the opinion that Landmark Complex is in a balanced you evaluate this space in comparison to similar position and it may be easily and favorably compared with developments in Baku? Has Landmark influenced buildings both in Baku as well as similar buildings abroad. With construction standards? the completion of Landmark III, we now have the possibility of Landmark complex consists of the following spaces: giving additional services to our clients. No doubt, this has had a positive effect on the value of the whole complex. Landmark I (Gross area 12 000 m2) Offices ...... 11 100 m2 What is your attitude to competition? Leisure Space ...... 900 m2 In our 55 year working life and in the last 17 years during which Landmark II (Gross are 5 700 m2) we have been in Azerbaijan, we have never been afraid of Offices ...... 5 260 m2 or shunned competition. On the contrary, we have always Landmark III (Gross area 45 000 m2) welcomed this. However, we are of the opinion that under the

9 in focus

changed circumstances with interest rates in the country being extraordinarily high and especially after the World Economic Crisis, it will not be possible to compete on similar terms.

The fact that numerous similar and somewhat large projects will be completed at the same stages and take their place in the market, is an issue to be followed with some anxiety not only by ourselves but also by many institutions and organizations operating in this field. Our only consolation lies in our belief that those who are behind these projects or those who gave permission for them are hopefully in possession of knowledge we don’t have about the long term economic potential of the country and the mobility this will activate. Up to now, the economy went very well and has been supported by high morale. The problem is hidden within the fact that the situation may reach saturation point and in the probability that the institutions which have made investments in this field start suffering losses. If such an unexpected situation arises, this becomes a very big loss for the future of Azerbaijan because the private sector which generates 80% of the economy becomes discouraged and it takes a long time to revive and reestablish this. On the other hand, there is no doubt that the replacement of considered as a medium sized 45000 m2 project. This project buildings like Azerbaijan and Absheron hotels by modern up-to- has been financed up to ground level as basic construction by date structures and other modern installations under construction us and the rest of it, in the main, by the credits given by the IBA will not only make the city more attractive but also contribute to Bank. Under present day conditions, our burden in this respect its position in the global arena, providing appropriate possibilities may be cleared by spreading it over a period of 12 years or more. for international congresses and other events. Needless to say, The longer the period we spread it over, the better it is for us. the priorities in the development of the country is not a subject on which we may express a decisive opinion. Do current indicators allow you to forecast any trends in future rents? It is very difficult to say what future rents may become and I As we have previously mentioned, all information relating to will desist from making a statement about this. We are not in a the future not being at our disposal, it may not be possible to position to pretend we are Nostradamus. make a precise forecast and consequently we prefer to keep our thoughts in this respect to ourselves. Azerbaijan is a rich, We envisaged the building of the Landmark Complex in a well administrated country but one which cannot be considered manner adaptable to different economic circumstances and very large. For this reason, economic, political and other trends certainly, time will show whether we have contemplated worldwide will unavoidably affect the trends in Azerbaijan. correctly or not. Can you describe some of the challenges you have faced How will you stay competitive in view of other hotels as a developer of many years’ standing. being built in Baku? In all our work we are using the most established and up-to-date Naturally, like all institutions, we too endeavour to organize systems and we are trying to train our personnel and work force our job in the best possible manner. However, at the time we accordingly. Because we prefer to work with local personnel both commenced our Landmark III project there was no information from an economic point of view as well as from our understanding that in such a small period of time the construction of such a of social responsibility, one of the most important aspects of our number of Hotel and Office buildings would be commenced. job is the difficulty in finding trained personnel. One other very We can imagine that the “Four Seasons” hotel will have an important factor is to be able to find credit at an interest rate which internal and external clientele peculiar to itself. However, may be considered reasonable. At the present time it would with the rest there will certainly arise an environment of appear to be possible to obtain credit from abroad at an interest competition. We are not afraid of this. In our 55 year working rate of Libor + 3-4%. However, they do not view favourably life, the winning of big and complicated construction projects giving more than 20-30 million US Dollar credits to private sector in various continents upon international tenders and the operators in Azerbaijan. These amounts, on the other hand, are carrying out of the same has always taken place as a result of not of much use for largish projects in a country where 2nd and a keen competition. We are optimistic persons and are always 3rd mortgages are not usual or well used practice, and where prepared to show the best effort at our disposal. syndications are not readily entertained.

How did you finance the Landmark III project? Given time, there is no doubt that we shall overcome this type Landmark Tower, more appropriately Landmark III, may be of issues and become successful.

10 Spring / Issue 9

in focus

Trends in Land Administration Eficiency, reliability and reduced costs for customers cadastre, which is relatively under-developed when compared Ariel Ivanier with the automated registration procedures. It is recommended Secretary of the Working Party on Land Administration (WPLA), United Nations that priority be given to ortophoto-mapping activities and to Economic Commission to Europe developing the cadastral (index) map. On what concerns land (UNECE) reform, although its implementation has been extensive, land fragmentation still poses a challenge to efficient agriculture. Also recommended is the need of more transparency in planning procedures and municipal decision-making process. In March 2010, a workshop was hosted in Baku on "Efficient Finally, there is the need to correct discrepancies between and Transparent Land Management in ECE Countries". The land maps and the actual location of land parcels, address UNECE Working Party on Land Administration addressed the absence of adequate institutions to regulate real estate measures for minimizing fraud and improving monitoring markets and the need to adopt objective methodologies for activities. Ariel Ivanier spoke to Impact about current real estate valuation. Measures to enforce good customer challenges to land administration authorities in Azerbaijan service and monitor citizens’ access to information on land and other CIS countries. and real estate should also be developed.

Please describe some of the positive reforms you have In 2007 the Government of Azerbaijan approved a Real noted in the regulation of the Land and Real Estate sector Estate Registration project to create a “one-stop-shop” in Azerbaijan. system. How effective has this been in terms of facilitating In Azerbaijan, major reforms have been implemented to registration, establishing a reliable database, making modernize the registration system, which aim at increased information accessible and reducing costs of transactions efficiency. At present, the registration of rights on real for consumers? estate is maintained both on paper (register books and The reform of registration of rights on real estate under the unified files with title deeds) and on electronic form at the territorial state structure (one-stop-shop mechanism) has passed through departments of the State Real Estate Register Service. A several stages and different agencies have been involved in this new system was developed by the national authorities in project. Beginning in year 2005, the authority for registration order to improve registration through automated procedures was concentrated under the State Real Estate’s Register and to apply modern information technologies as well as Service (which works under the State Committee on Property set up local computer networks at the regional level. At the Issues since May 2009). The goal was to create, according to same time, specific software was developed for maintenance existing international trends in land administration, an adequate of the cadastre of land parcels, which is linked with the institutional framework for maintenance of ownership rights by national registration system. Digital databases with modern a single state body that could reduce costs for consumers as technology are currently being built up to improve data well as provide improvements in the efficiency and reliability of exchanges related to real property transactions as well as real property transactions. The reform would also allow a more to improve ordinary data maintenance procedures. The goal transparent access to information on land and real estate. In of authorities is to achieve a nationwide computer network 2007, the government approved a Real Estate Registration linking all the territorial departments with the national office, Project (RER, worth 38.5 million dollars) funded by the World where relevant information will be stored in a central server. Bank that seeks to create a single automated system for real estate registration to be finalized by year 2013. The project was What are the major challenges facing Azerbaijan? set up to take advantage of synergies that will result of adopting The UNECE undertook a land administration review of the “one-stop shop” mechanism in land administration to facilitate Azerbaijan, which was published in year 2007 and an registration, promote the merging of databases on land and real upcoming country profile on the housing sector also includes estate, increase the use of information technologies and reduce a chapter on land administration. The two studies have costs of real property transactions. It is a significant initiative found that the main challenges in land administration are that, if successfully finalized, will contribute to smoother land overlapping functions between different authorities and an registration procedures and increased welfare for consumers. unclear distribution of responsibilities between national, regional and local levels in decision-making. Some of these What measures are recommended for minimizing fraud challenges are being addressed in the process of creating a and increasing transparency? How is WPLA cooperating “one-stop-shop” mechanism for land registration, but other with the government of Azerbaijan to pass on best challenges remain in what concerns upgrading the real estate practices to increase regulation of the sector?

12 Spring / Issue 9 in focus

The UNECE has addressed this question during a workshop on countries where the UNECE has been recently involved through “Efficient and Transparent Land Management in ECE Countries”, the undertaking of land administration reviews, the following which was held in Baku, Azerbaijan on 4 and 5 March 2010. The trends have been observed. In some countries in Eastern event featured presentations of national experiences in the ECE Europe and the Caucasus (such as Belarus and Azerbaijan), region dealing with recent reforms to increase transparency on reforms on registration systems are well advanced and the access to information on land and real estate. The event also authorities have implemented and made operational “one- allowed the Working Party to discuss an ongoing study on fraud stop-shop” mechanisms for cadastre and registration services. in real estate registration and conveyance, which was started In these countries, introducing universal E-land administration after national authorities increased their awareness that fraud mechanisms would further facilitate necessary reforms for poses a real threat to sound land administration. The study, property registration and conveyance. In other countries in which aims at providing guidance and best practice examples, Central Asia, governments are still dealing with the outcomes will be discussed in-depth during the seventh session of the of flawed privatization processes undertaken during the 1990s, Working Party on Land Administration in Geneva next June when reforms were pushed without sufficient regard for the 2011. Preliminary findings have shown that solutions are creation of adequate institutional frameworks for real estate available to ensure the security of transactions through better markets. Progress in these cases is expected to occur at a monitoring, training schemes for civil servants and restrictions lower pace, with a focus on institutional reform. For instance, in access to information for anonymous users. It is important in Kyrgyzstan, pending challenges include improvements in to mention that no evidence exists in the region that the the processes of land allocation, systematic land legislation, creation of electronic registration mechanisms has created land payments, land use planning and rural development. In new vulnerabilities to existing systems. On the contrary, in Tajikistan, the registration of land started only in 1998. In this particular for countries where internet based land administration country, current real estate registration processes are complex services are incipient, such as Azerbaijan, increased attention and not very efficient: there is a duplication of registration data is needed by government authorities on all activities directed to and the parcel-based system is incomplete. In what concerns increase public awareness of the advantages of e-government the expected changes for the next five years, due to limited technologies to promote transparency. available funds for implementing reforms at the national level, the UNECE foresees that international cooperation will be What is the trend in the CIS region in regard to efficient fundamental for the region to succeed. This should occur land management? What changes do you expect to not only in the form of financial assistance, but also through observe in 5 years? training and capacity building activities for public officials, In general, land administration could be improved in the CIS which in some cases are already underway. region by reforming the taxation systems to make them fairer, more objective and transparent as well as by promoting a Ariel Ivanier joined UNECE in September 2008 as Secretary clearer definition of real property rights (especially in what to the Working Party on Land Administration. He is a concerns land reforms of formerly collectivized agriculture) political scientist and holds a Ph.D. degree from Boston and facilitating real property formation procedures. It should University. Prior to joining UNECE, he has worked as a also be noted that the priorities and urgencies regarding the researcher at the Massachusetts Institute of Technology enactment of efficient land management reforms at the national (MIT) and the Inter-American Development Bank. He has level are uneven and vary from country to country. Thus, the also earned university degrees in International Relations implementation of policy changes should be incremental and at SAIS Johns Hopkins University (MA) and San Andres contemplative of each individual national context. Amongst the University (BA). in focus

Hill Comes of Age in Azerbaijan A benchmark in the Caspian region

When a definitive chapter is written about the building of a total built-up area of nearly 235,000 square meters (2.53 a new Baku ever since it became an independent republic million square feet), with 1,200 basement car parking spaces. in 1991, a space should be kept for the iconic 21st century From the exterior on their impressive elevated site near the Flame Towers project. Azeri Parliament, the trio of towers will be shield-shaped in cross section and have a distinct look of three rising flames, a Towering to a maximum height of 192 metres, the iconic symbol from Azeri mythology. US$350 million development will comprise three curving towers ranging from 34 to 39 stories and rising from a When completed in the summer of 2011, the Flame Towers podium with an extensive roof garden. The client is Azinko will not only serve as Azerbaijan’s most successful showcase Development MMC, a private developer based in Baku; of its progression to embrace Western international standards while HOK International Limited, out of its London office has of construction and living, but they will also be an icon for other prepared the design concept. nations in the former Soviet Union (FSU) bloc to replicate whilst highlighting Azerbaijan’s leading status in the region. The Located on a prime site in Baku and with views of the Caspian vision of the Investor is to deliver a project of the design, style Sea, the mixed-use facility will be home to international high and standards you find in New York, London, or Dubai, and to quality offices, a five star Fairmont hotel with a state-of-the raise the bar and set the standard of mixed use developments art conference centre, flick restaurant, spa, and serviced in Baku, in Azerbaijan, and the region. apartments, as its prime attractions. The towers are linked by centrally-located retail and leisure facilities, and will have “This is indeed a very challenging project for my team and

14 Spring / Issue 9

in focus

for me, based here in Baku,” said Kevin Denton, General as support services such as scheduling and claims review Manager of the Hill International (Azerbaijan) office in Baku and mitigation.” Denton continues, “Hill has Knowledge and also the Project Director for the new development. “We Centers, based in the UK and Dubai holding a library have introduced and oversee processes and procedures of of every code, standard, and publication related to the international standard - contracts, quality control, material design and construction of projects. It’s a great resource. selections and procurement, design management (the project All an employee has to do is request by e-mail a specific utilizes the design/build fast track delivery method) and interior issue, and a Knowledge Center Analyst will research design, budget management, construction techniques, and available reference material and e-mail it to the project site safety that a project of this size and complexity requires. immediately.” We work daily with the developer and contractor to ensure Kevin continues, “Hill International has identified Azerbaijan international standards and highly developed project and the CIS Region as a growth market, and has made a long management processes and procedures are maintained. For term commitment to establish in Azerbaijan, not just for one example, the project is being designed and built to comply project but to be able to offer clients a full range of services to NFPA (National Fire Protection Association), the American for projects from infrastructure to high tech buildings, such as fire and life safety code, as well as local codes. This required the Flame Towers project. By offering a one-stop full range hiring experts and design consultants who are familiar with of services, from inception to commissioning, we expect to the code, and familiarizing the contractor and local authorities show more customers the value we add to a project and their with the code.” business. We are looking for more projects to sustain our presence here.” Implementing the best project management and contracting practices is always at the heart of New Jersey-based Hill International and no effort is being spared for the Flame Towers Challenges venture to assure its successful completion and position as a landmark symbol of Baku in the 21st century. The Flame Towers project has come with its fair share of challenges however, and no one knows this better than In January 2009, Hill International was awarded a contract to 46-year-old Denton who maintains an 11-hour work schedule provide project management services for the development, each day to ensure all is well. which had been structured to be implemented on a fast track basis. Employing 2,300 professionals from all fields of “Right from the word go, Hill International has worked with construction and project management in 80 offices globally, the Developer to implement international standards of design, Hill International has a reputation for the successful delivery procurement, and construction management techniques of premier projects, as a consequence of which last year, Hill to the project to achieve the Developer’s vision, some of International was ranked by the Engineering News-Record which were introduced for the first time to the Contractor,” (ENR) magazine as the 11th-largest construction management he said, hastening to add: “Baku was a new territory for Hill firm in the US. International.” For the contractor, DiA Holding, this is the “This is our first major assignment in the Republic of largest project they have carried out and there is pressure Azerbaijan,” Raouf S. Ghali, president of Hill’s Project on them to complete the project on time and within budget. Management Group (international), said soon after putting pen “I have been extremely impressed with the level of skills and to the contract. “We are honoured and excited to participate how hard their staff of Azerbaijanis and Turks work to achieve in the construction of this ambitious development, especially the project requirements.” with its innovative design which we are sure will become a significant landmark in Baku. The project is important for “Our personnel are a mix of Azerbaijanis, Georgians, Turkish, us, as it has balanced the innovative, iconic nature of the Polish, Americans, and British. All have been hand selected, design while maintaining the economic feasibility. Baku is an and have experience on international projects, so they are important strategic location for Hill as the newly-independent familiar with international standards. All have been involved in states have a growth potential due to the private and public large projects, hi-rise projects, and have 5 star hotel and retail investments.” experience. What Hill International contributes is international “Hill International is a great resource for Azerbaijan”, experience, and a highly developed framework of project Denton adds. “We have so many available resources and management processes and procedures.” experience we can draw from. We can draw on experience from our 80 offices around the world and mobilize highly Logistical challenges have not been easy to overcome either, educated, experienced experts in a structured mobilisation with the need for procurement of some materials from outside timed to reflect the project needs. We have TCTs (Technical of Azerbaijan. Core Teams) located in Ankara and Dubai that can provide technical reviews of plans and specifications, or any specific “Reinforcing steel is sourced from Ukraine, cement from Turkey, issue or need that may come up during a project. These glazing from the U.A.E., aluminum profiles manufactured in teams comprise of experts from every discipline, as well Germany, and so on. As a rule of thumb, it takes about 30

16 Spring / Issue 9 in focus

days for a bag of cement to arrive on site,” he said, explaining that the materials are shipped over land routes after being purchased.

“Azerbaijan continues to emerge quickly out of the Soviet era in many ways. Manufacturing facilities are coming on line. Laws and regulations are continuing to develop and evolve. Keeping abreast of the changes is a big challenge. Our first task was to set up the business, process work permits and residence visas and attract local trained personnel. Lack of up to date, reliable information about Azerbaijan, either on the internet or by way of word-of-mouth, did little to help. It has been frustrating at times, but we continue to be persistent and flexible.” he explained. “International standards in housing, and the conveniences we take for granted in the U.S. and Europe are now being developed in Azerbaijan. Many of our staff are in their second or third apartment but, all around you, there is a buzz of constant and rapid improvement, and they are keen to be part of this growth. It’s happening quickly. You can see improvements catalyzed both by private development and government programs.” without notice. Other than that, we are basically on schedule.” “There are dozens of tower cranes over the skyline, with most of he added. the construction activity being focused around Baku. Projects have been also been identified for sports based developments, including a ski resort and golf course development, besides the Satisfactory progress setting up of wind farms and hydro-electric projects for power generation, road and water infrastructure, and wastewater Despite these issues, approximately 40% of the work has until treatment plants. We have similar projects throughout this now been completed, with the aim of delivering the project on region, and worldwide, and can apply our knowledge and time. resources to add value by working with the developer, or government agency, to secure the appropriate solution and to “Personally to me, Flame Towers is an exciting concept and deliver it on time, within budget and most importantly, to the design, based on Baku’s belief in the historical concept of very best standards of quality” Denton said. worshipping fire. When I was asked to come here, and saw the concept drawings of the project, I wanted to be a part of Yet another challenge was posed by the lie of the land and it. I think it will be an internationally recognized and significant geological issues. project.” he said. “Existing unknown utilities were encountered on site. The site is on an incline with one side elevated 23 metres above the These are changing times for Azerbaijan which is seeking foreign other. Thus, the excavation is five stories deep in places, and direct investments (FDIs) into its domestic economy. Be it oil or a massive bored-pile retaining wall was required to perform non-oil sectors, the government in Baku is doing all in its power to the excavation,” Denton said. emerge as a preferred destination in the FSU states.

Also, according to Denton, the Flame Towers’ site, as With crude oil prices stabilising above US$75 per barrel with all developments in Azerbaijan, must be designed to in the global markets and the state coffers benefitting, the recognise potential slip zones and a seismicity level-8 zone. expectation will be for a raft of new projects to be tendered Thus there was a need to drive concrete foundation piles and constructed. 50 metres into the earth. “It’s the most massive foundation I have ever seen and the most heavily reinforced structure Given their experience and with the success story of completing I have experienced.” the Flame Towers project on time and within budget, Hill International will keep a hawk’s eye on new developments not “Winds on site often reach 90-120 kilometres an hour, only in Azerbaijan but also the adjoining FSU states. shutting down the tower cranes. The crane motors just can’t take it and safety would be unacceptably impaired in such Few will deny that the Flame Towers will serve as a benchmark conditions. Also, the building is located across the street from in the Caspian region and will be a classic example for others the Parliament Building, so work gets stopped for official visits to follow.

17 feature promotion

Mr. Rauf Mehdiyev, Chairman of the Executive Board, “NJT Group” First of all I would like to take this opportunity to Which companies are you currently working with? congratulate you! One of the companies of NJT Group Founded in 2000, and achieving remarkable success within recently received an award from the Economic Council of a short period of time, NJT Group offers ready (prepared) CIS. What was the award for? plastic products to governmental agencies, private Thank you for your attention and congratulations! Indeed, on companies and individual entrepreneurs. We also develop December 11, 2009, part of our group, “NJT2000” company cooperation with regard to product sales and marketing as received an award from the Economic Council of CIS for their well as purchasing raw materials and technologies from over achievements in providing high quality products and services 15 countries like Germany, Turkey, Russia, South Korea, in the category “Production of Manufacturing Products”. I would Italy and others. like to mention that this competition has been conducted since 2005 among CIS companies; at this particular competition only What are some of your most important projects? 6 companies within CIS countries were honoured. Three out of NJT group has already won a number of tenders and six prizes went to Azerbaijani companies, NJT2000 inclusive. is therefore involved in the execution of several major This fact could be considered as one of the indicators of governmental projects. We are aiming to widen our activities improvement in the local standards, and strengthening of the in this sphere in the near future. Our efficient personnel economy. and the technological and production capacity of the group In addition to a great number of prizes awarded, I would like of companies make it possible to achieve our goals. As to mention our successful activities, high quality and hygienic our prioritized activities, I would like to mention our close compliance of our products and receiving of the international involvement in the re-establishment of the water supply, certificate of quality ISO 9001:2000 in 2004. Our main goal is to irrigation and drainage system of “Azersu” with the financial prevent our clients from facing problems with lower quality as support of World Bank, as well as SOCAR/Azerigaz’s well as to make sure they use stable and guaranteed products infrastructural projects on renewal (re-establishment) of gas- by involving new technologies. pipes all over the country.

18 Spring / Issue 9 Mr. Rauf Mehdiyev, Chairman of the Executive Board, “NJT Group” feature promotion

Bakpek, implementing high technological standards, is building a modern refrigerator barn for storing more than ten thousand tons of agricultural products in the course of the year. “Kleirberit-Azerbaijan” is a Germany-Azerbaijan Joint Corporation. This company is engaged in the distribution of high quality adhesives used in the building and furniture sectors. “R-Plast Turkey” provides these production companies with high quality raw material and new technologies from Europe. NJT Group gives 50 years of quality assurance for many of their products.

How do you invest in your employees? Do you provide training? First of all, NJT Group, being interested in the opening of new work places by broadening local production, has successfully managed to attract young professionals and experienced employees. For the purpose of improving and developing the skills and professionalism of its employees, NJT Group organizes different types of trainings and seminars on a regular basis. Apart from this, we also pay great attention to improving the social security of our employees. Along with accidental insurance, we are planning to provide each of our employees with medical insurance.

Which countries do you operate in? What are your strategies for future expansion? Apart from Azerbaijan, NJT Group has mainly focused on CIS and Middle East countries' markets. For these purposes, NJT Group has launched branch offices in Kazakhstan, Turkey, Ukraine and United Arab Emirates. Double wall corrugated pipes NJT Group, whoes the strategic plans include business expansion not only in countries of CIS region but all over the Would you like to emphasize any particular achievement world, desires to enlarge its own positions in the broader area. which makes you so successful? That is why we have establishd representative offices on four It is worth mentioning that one of the most recent achievements continents and, in accordance with production requirements, of our companies was the purchase of new technologies from we aim for growth in the quantity and scope of our operations German company “Drossbach” with the support of Azerbaijan in different regions. The major part of our profit goes back into International Bank and Hermes Foundation, which gives us a production and to open new work places, thereby creating chance to produce double wall corrugated pipes. I think, in the jobs. We are confident that banks consider us a reliable partner near future, we will be able to provide neighboring countries and would apportion credit under favourable conditions. along with the local market with this type of pipe. These pipes Relying on wide experience, NJT Group is planing to use more are very durable and stable, therefore they have been widely innovative, modern technologies and exploit the opportunities of in use for drainage and sewage systems. advanced information technologies. The company management NJT Group is considered to be one of the leaders in CIS realizes that if they don’t move with the times, they won’t achieve countries for production of plastic industry products because huge success in business. of the high quality, balanced price policy and professionalism and expertise of our personnel. For project implementation the What is the next big step for your company? company has a construction mechanism base, manufacturing In view of the transition to IFRS, International Financial plants for construction materials, laboratories for quality Reporting Standards, in accordance with the decree of the control of production and subsidiary farms. President of the Republic of Azerbaijan Ilham Aliyev, a new system of administration has been introduced in the group of Can you give us a brief description of your other products companies. We are currently implementing an action plan for and services? the improvement of account registration, internal and foreign NJT Group's BTQ (consumer utensils production factory) is audits and developing professional personnel which spans the certified and conforms to hygienic standards. 3 year period 2009-2012. Production of liquorice products (PLP) using extracts from the roots of liquorice for use in the tobacco industry and medical For further information about NJT Group, please go to our treatments. website. http://www.njtgroup.az/

20 Spring / Issue 9 in focus

Cementing the Market Domestic producer invests in technology to boost capacity to 2008 but it still fared better than other countries in the region. This drop was mainly attributed to the residential segment while infrastructure construction remained at the same level. How do you forecast supply and demand in your local market? There are various forecasting indicators in our industry, such as population growth, population wealth (GDP per capita), surface of residential, retail or office space, the number of new projects that are announced, just to name a few. The monitoring of trends in different sectors of the industry is a continuous process which depends on people collecting information. If the people are reliable, the choice of indicators becomes less important. What is the capacity and sales volume of Garadagh Cement? We have the capacity to produce approximately 1.3 million tons of cement per year. In 2009 we sold 1.1 million tons, which is equivalent to a 35% market share. Sales were affected by low demand although Garadagh Cement performed better than the market. Our current forecast is similar to that of last year. In the future we expect the domestic market to perform better than the regional.

Who are some of your best and your most profitable customers? We value and treat all our customers with respect. Every effort is made to identify and satisfy their different needs. We no On the 20th kilometer along Salyan highway, the main longer think of selling products but concentrate on developing industrial artery of Azerbaijan, lies the country’s only solutions. We conduct customer and job site visits to determine integrated cement plant. Truck drivers know it as “tsement how our clients can benefit from working with us. Of course zavod” with its origins in the Soviet industrial zeal of the clients in the private and public sectors have different needs 1950s. White clouds of steam – not smoke – billow out from and expectations because they operate in separate market the stacks of this domestic private giant, which forms part segments. Private companies work mainly in the residential of the Swiss Holcim Group. With a capacity to churn out up segment, while infrastructure is dominated by public sector to 1.3 million tons of cement per year, Garadagh Cement clients. We offer customized solutions for specific applications is a market leader. Mr. Horia Adrian, the General Manager in both segments and provide technical assistance and support. from Romania, talked to Impact about the conditions in the market for construction materials. Low demand relative In classifying customers by needs, I see two groups – to previous years has led to price reductions of 27% on professionals and users. A professional customer wants to be average. Despite this the company is pushing ahead with more competitive in the construction market and therefore aims to the introduction of new dry cement technology, which will optimize the production process by using the right raw materials. “turn off” the steam on the stacks. This is one of the largest This is the customer we provide with extensive technical support, investments in the non-oil sector. Among other things, such as producing mix designs on request, developing products it will help increase output and solidify Garadagh’s 35% with specific chemical or physical properties, tailoring logistics market share. From this vantage point Mr. Adrian graciously services, and so on. Users, on the other hand, are only interested welcomes fair and healthy competition in Azerbaijan. in the strength of cement. For them we have technical education services to explain that the durability of construction depends What is your assessment of the construction industry on all materials and methods used. It is important to find the worldwide and in Azerbaijan? right cement for the right application without compromising on The construction industry worldwide suffered from a downturn the quality of other materials. Cement alone will not help if bad in demand. Some regions were affected more than others. In quality sand or gravel are used, for example. Asia, for example, demand continued to rise whereas North America and Eastern Europe were hard hit by the global We try to build quality awareness among our customers. financial crisis. Azerbaijan saw a 25% drop in demand relative Unfortunately people have a very short-term planning horizon

21 in focus

and they forget that a bridge or a road is not built for two years, but for 50 or even 100 years. The use of products of doubtful quality, many of which are imported, will not improve the durability and safety of any construction.

Do you expect any new players to enter your market in the near future? Garadagh Cement is a major player in the cement market in Azerbaijan. However, it is not the only one. We have an average market share of 35%, which should be sustainable in the future. Garadagh Cement is an innovative company. We are on track along one of our key objectives to bring a new product or service to market every two years. There have been several announcements regarding new cement plants opening in Azerbaijan since my arrival in 2004. I think competition is healthy and I would be more than happy to welcome another fully integrated player in the domestic market. Competition is good for customers, for industry development and ultimately for us. Fair competition keeps a company fit to stay in the market. Unfortunately today’s competition does not bring many benefits to anyone due to doubtful variable quality and lack of services. We will appreciate fair and healthy competition that would benefit the capacity to fight fake cement and increase awareness of bad entire construction industry in Azerbaijan. quality products in the bag market.

How do changes in technology and construction Outside the bag retail market, all other market segments are standards affect your business? supplied directly by Garadagh Cement. We strongly believe We are actually driving changes in the local market. Garadagh that it is mutually advantageous for us to stay close to our Cement is currently undergoing the largest investment in professional end users. Any potential customer need can the non-oil sector in Azerbaijan. The investment is aimed at be met quickly and in a personalized way. Existing market replacing the existing wet technology clinker production line conditions call for this type of arrangement. Of course, with a new dry kiln. This state-of-the-art technology will help we monitor these conditions closely to be able to adapt if reduce energy consumption, increase production capacity by necessary in the future. 40%, and ensure compliance with the highest environmental standards. What is your approach to ensure compliance with local I would like to remind here that we promoted the introduction and international environmental standards? of European standards for cement back in 2005, even before Our objective is, first of all, to comply with local standards, the new Russian GOST was introduced in Azerbaijan. At but being part of an international group, we have to comply Garadagh Cement we value creativity and innovation. We with Holcim’s strict standards as well. We use various criteria, look for new solutions for the local construction market. including environmental ones, in selecting our suppliers. Of course there are still innovations that did not reach For instance, our transportation services subcontractors Azerbaijan, but I would say that this is normal, considering are required to modernize their fleets and bring them in line the current level of industry development. Garadagh with European standards. We are committed to finalizing Cement is part of Holcim Group, one of the worldwide this process by the end of 2011. Finding local suppliers who leaders in construction materials. We benefit from the vast are compliant with the highest environmental standards experience accumulated inside the group over nearly 100 is definitely a challenge. It is a learning process, which can years. Besides we closely monitor domestic and regional happen with our support. market changes. What is your vision for the next five years? How do you manage relationships with distributors? There are always challenges but I am confident that Garadagh In 2007 we introduced a distributorship system to supply the Cement will always be a very adaptable and agile competitor. bag retail market. This was done in response to prevailing Our current investments in people and technology will help us market conditions in Azerbaijan, specifically fake cement, preserve a competitive position to face any market challenges price speculation, improper documentation, etc. In the last that may come. few years, improvements were made in all these areas. Low demand reduced price speculation in the retail market to zero. Interviewed by Natalia Corobco To achieve success efforts must be made to strengthen the [email protected]

22 Spring / Issue 9

in focus

A Revolution in Retail Say 'Hello!' to Baku's first mall

Park Bulvar is Azerbaijan's first mall, affording a glimpse Kitchenette with an international menu. into the future of retailing in Azerbaijan. Old and young will delight in a trip to the stars, complete with Kadir Ozbey, the General Manager, puts it poetically. ‘It’s not sound effects, in the Planetarium which screens all-day shows just a shopping centre. It’s a life centre’, he says, expressing in Azeri, Russian and English. This is in the nature of a gift his vision for all that this iconic development represents for to the people of Baku, seen more in terms of enjoyment and Bakuvians. Park Bulvar has something for everybody. It’s the educational value than as a money spinner. ultimate shopping, eating and leisure experience, with 4 floors Six theatres in the Cineplex, in a host of designs to suit every + mezzanine of name brands, restaurants, fast food outlets, a age, mood and occasion will screen films in 3 languages. This Cineplex, a bowling alley, bookstore-cafe and the largest Kids’ is operated by a Russian partner with a strong track record in Zone in Baku equipped with computer games and a group the management of entertainment complexes and cinemas. play area for 1-15 year-olds. A mezzanine dividing the generous height of the top floor Visitors entering through 4 entrances, having left their cars in holds a bookstore-cafe and an area managed by Park Bulvar the 550-car underground parking lot, are treated to a plethora of with gallery space for exhibitions and events. the newest brand names as well as more familiar faces on the The basement is home to a drycleaning service, shoe and first 2 floors. The first floor also boasts a World Fashion Cafe. clothing repair and other essential services. Citimart occupies The 3rd floor Food Court has the world’s first Azeri Fast 1207 sq.m of supermarket shopping, extending their offer Food restaurant, appropriately named Kabab Park, where beyond fresh and dry goods to a bakery, cafe and bistro. the management worked closely with 2 young entrepreneurs Bringing all these internationally renowned names together to offer the sophistication of Azeri cuisine in a take-away is quite an achievement, especially in light of the economic package. Kalinka is another first, featuring mouthwatering downturn that took many brand names out of the running. Russian blinis with a variety of toppings. Fan-Fang caters to Although this is a very young market, Park Bulvar counted on those with a yen for Asian food, while Baskin Robbins and the concept being familiar to retailers. Maintaining close contact Segafredo, both oldies but goodies, are also present for the to local retailers as well as investigating abroad and talking to very first time in Baku. Turkish and European brands, especially in Spain and the UK, The 4th floor houses 2 new restaurants for those with the leisure Park Bulvar came up with a concept and a business plan which to dine: ‘Zeytun’ with a mixed Azeri-Mediterranean cuisine and enabled investors to attract big names to Baku. They say they

24 Spring / Issue 9 in focus

have applied a rigorous selection and screening process to determine WHO gets in. Employing to ensure the best mix of goods. No amount of arm twisting by potential investors has prevailed against a strong determination to establish their reputation and ensure the best mix of goods.

Does Park Bulvar see itself as a formidable competitor for other retailers in Baku? ‘We do have the advantage of being the first development of this kind on the Neftchilar Avenue’, admits Business Development Manager Zarifa Mirzoyeva, ‘and maybe it’s going to make a difference to consumer expectations and cause some shops to close, but we are also pioneers, opening the way for others to explore and exploit this concept, and adopt our business plan in the future! This is not just about commerce. It’s about fun, leisure, enjoyment, about enhancing the quality of people’s lives’. in retailing in Azerbaijan, they said that the situation can be misleading. It is not always possible to understand or accurately The mall targets what she calls a ‘middle market’. Keeping predict consumer behaviour or buying power. They hope that prices within controlled limits means that it aims to be affordable the prevailing desire for fast and cheap fashion will morph into across all sections of society and appeal to those who head up a more informed taste based on increased exposure to global the high street to Topshop, as well as to those whose habitual brands and their sophisticated marketing and presentation. hunting ground is the rarefied designer outlet. And those who For the moment, they are very happy to have brought all these have kids will find it hard to resist the diversions on offer. Park ‘firsts’ together and eloquent in expressing their gratitude for Bulvar seeks to attract people who wish to spend quality time the welcome they have received in Baku, the cooperation of in a pleasant and stimulating environment. the private sector, and the very positive indicators. The secret of their success? Says Ms. Mirzoyeva, ‘we have very special The $40 million development covers a gross area of investors and a very special team.’ 40000msq, of which 17 500msq is leasable space. The key investor is Baku Plaza Ltd., and major client investors number 1 Floor Infinity for Debenhams, NOVCO with 10 stores, and Caspian Debenhams; Mango; Bebe; Aftershock; Nine West; Benetton Invest for the cinemas. The construction company INNOVA 012; Benetton; Van Laack; Koton; Nike; Adidas;Coast;Pablosky; is a part of Azersun Holding, and employs sub- contractors Sisley; Donna; Il Bernardo; Axara; Accessories; Liu Jo; Etam; for electrical and mechanical engineering work. The budget BMW Accessories; World Fashion Cafe has been exceeded owing to the sophisticated roof design which necessitated a very exacting standard of construction. 2 Floor This also contributed to the construction taking longer than Debenhams; Fabrika; Austin Reed; Sel-Home; Cacharel; Pink; expected. This has been one of the challenges faced during Colin’s Girandola; Banana Moon; Mayoral; Playlife; Shakh; the project. VMF; So Chic; Pieces; Parfumeur; Incanto; Original Marines; The location of the development on the boulevard has also posed Oasis; US Polo; Segue; Veromoda; Jack Jones; Only; Inci problems, as water isolation, anchoring, and protection became necessary. Close cooperation with the boulevard management 3 Floor has been key to overcoming this challenge. Park Bulvar considers Happy Land (Kids Zone); Alma Store; Cinelli Home;Vodafon; that it is worth it, to be in a fabulous location and give Baku a Atom Toast; Fan Fang; Kalinka; Da Rancho; Baskin Robbins; landmark with a beautiful, unique design to be proud of. Kabab Park; Sultan’s; Segafredo The complex works with franchisers who sign a 3-year contract. There is a fixed price per sq metre of rental space. In 4 Floor the second and third year of the contract, the rent increases Cinema; Planetarium; Photo Studio (M Studio); Zeytun by 5%, irrespective of inflation and currency fluctuations. Restaurant; Kitchenette Restaurant; Bowling Contractual obligations are clearly laid out. (This is belatedly added to the list of challenges, as many tenants are simply +4 Floor (mezzanine) not used to this, having hitherto dealt with a landlord with a Gallery, La Vita Cafe few sheets of paper). Park Bulvar has had the difficult task of convincing tenants that the voluminous and comprehensive -1 Foor (parking) contract provides added security and is of benefit to all Supermarket and Services: dry cleaning, shoe repair, tailor, concerned parties. watch repair… Park Bulvar expects to break even and start to show a profit in 8 years. When asked to comment on foreseeable trends -2 Floor (parking)

25 in focus

Coming Soon to a Skyline Near You

Full Moon Rising Crescent Towers

SOCAR Tower

Park Boulevard

Mugam Theatre Absheron JW Marriott

Hilton Hotel

Heydar Aliyev Cultural Centre Altes Plaza Port Baku Project

Baku Business Centre Sky Park Flame Towers

26 Spring / Issue 9 member contribution

Draft Construction Code: New Concepts and Requirements On Acceptance of Completed Structures for Use dated Natik Mamedov December 30, 1999 (“Rule 7”) and the Rules On State Associate Supervision in the Construction Industry by the Ministry Vagif Karimli of Emergencies, approved by Decision No. 272 of the Associate, Baker & McKenzie, Baku Cabinet of Ministers dated December 5, 2008. The draft Construction Code makes the pre-development approval process more transparent by specifying the construction phases to be completed in the following Introduction sequence:

Since independence in 1991, Azerbaijani’s economic policy 1 preparation and approval of initial project plans and has focused on attracting foreign capital into Azerbaijan. To drawings relating to the proposed land development; this end, Azerbaijan has been implementing a legal regime to encourage foreign and local investment in various industrial 2 (i) land allocation for the implementation of the project sectors, including commercial, industrial and residential (unless private land is to be developed) and (ii) the construction. While growing rapidly, particularly during the issuance of construction pre-clearance. Currently, construction boom of 2003 to 2007, this market has not phases 1 and 2 are in reverse order, i.e., land allocation been subject to specific regulatory attention until recently. It and pre-clearances are issued before review of the initial had been regulated, for the most part, by the old Soviet-era project documentation; regulations known as Gosudarstvenniye Standarty or GOST and Stroitelniye Normy i Pravila or SNIPs as well as uncodified 3 (i) specification of minimum engineering requirements construction law. based on the technical opinions of the relevant authorities and (ii) preparation of a construction passport and In early January 2009, the Cabinet of Ministers issued architectural-planning orders which are then given to the Resolution No. 7 On Approval of the Plan for Improvement applicant; of the State Construction Standards Documentation System, instructing certain governmental agencies, including the 4 engineering-research works and preparation of Ministry of Emergencies, the State Committee on Construction construction project documentation; and Architecture of Azerbaijan, and the State Agency for Standardization, Metrology and Patents to jointly prepare: (i) a 5 approval of construction project documentation by state draft Construction Code, and (ii) a draft program on the State authorities, including environmental, sanitary, geological, System of Construction Standards. The draft Construction seismic, fire, gas and electrical safety clearances; Code has been prepared and has passed the first reading in the parliament. While not yet available to the public, the draft 6 state evaluation or “expertise” of the approved construction City Development Code has also reportedly been subject to project documentation; discussion. 7 a permit allowing commencement of construction; This article discusses the new legal concepts, regulatory and technical requirements relating to the commercial development 8 engagement of a contractor; introduced by the draft Construction Code. 9 supervision during construction including: (a) technical supervision – the developer/owner of the site who has the Stages of Construction Works right to suspend construction upon discovery of defects or deviations from project documents; (b) internal operational The State Construction Committee is the principle supervision, including supervision of materials quality, agency regulating construction-related documentation testing and utility acceptance; (c) architectural supervision requirements. Presently, these matters are regulated to ensure compliance with architectural, construction, by State Construction Committee Rule No. 7 On the technical and other technical rules and standards; and (d) Organization and Performance of Construction Works and state supervision by executive and regulatory authorities

27 member contribution

to ensure that construction complies with the project documentation and applicable regulations and standards; and

10 issuance of an occupancy permit. State Expertise

Under the draft Construction Code, a Class One or Class Two construction1 is subject to a prior state “expertise”, as is already the case under current law. The draft Construction Code, however, imposes more stringent requirements for state-sponsored and state-funded projects and provides that the private projects are subject to state expertise of a lesser review which is likely to revive the development market. Construction Permit

The draft Construction Code excludes small personal of structures and communication and utility infrastructure, and agricultural projects from the construction permit (iii) the location and direction of communication lines, (iv) a requirements. It also improves the transparency of the permit topographic map of the land, (v) the nature and terms of the application process: (i) state expertise (safety opinion letters) construction project, and (v) the opinions of state authorities and construction pre-clearances, (ii) project construction and utility suppliers concerning land allocation and the documents, and (iii) evidence that a developer has contracted proposed construction. The draft Construction Code makes with an accredited laboratory to test the quality of the these construction passport requirements more specific. construction materials. All are required to obtain a permit to commence construction. The draft Construction Code also shortens the term of construction passports from two years to six months – during A permit application may be rejected if the project does not this period, an applicant is required to prepare the construction conform to the city’s (or area’s) general development plan. project documents and commence the land development. General development plans, however, should be made The draft Construction Code now requires a construction publicly available to ensure the success of the projects. passport for new developments and for all types of construction, including renovation – an issue not specifically addressed by Construction Passport current law.

After land is allocated for construction, the local executive Suspension of Construction authorities prepare a construction passport2. At this point, an applicant must obtain from its utility providers the terms for Works gas, electricity, heat and water supply and for sewage, radio, communications and other services. The draft Construction Code provides for suspension of the construction works for up to three months upon: (i) a decision Rule 7 provides that a construction passport is one of the of state supervisory authorities, (ii) suspension of construction construction project documents needed to develop land. A for more than one month, (iii) the owner’s request to suspend construction passport generally includes (i) a drawing of the construction; (iv) the owner’s application to conserve the allocated land, indicating adjacent streets and intersections, construction site; (v) discovery of serious construction defects (ii) information on the surface of the land and the existence affecting safety on the construction site.

1 Class One structures include oil and gas pipelines, oil reservoirs of 10,000 cubic meters or more, hydro and thermal electric stations, water reservoirs of 10,000 million cubic meters, sport stadiums, concert exhibition halls, cinemas, theatres, museums, subway tunnels and stations, transportation infrastructure and buildings at least 100 meters in height. Class Two structures include all other residential and office buildings, except for residential buildings and suburban houses of up to 12 meters in height.

2 In the City of Baku, the Main Office of Architecture and Urban Construction of the Baku City Executive Authorities.

28 Spring / Issue 9 member contribution

A lengthy (up to three years) suspension is envisioned due to: (i) non-compliance with construction standards and rules; (ii) the need for amendments to construction documents as a result of changed circumstances during construction; (iii) the owner’s financial inability to continue the project; or (iv) construction materials and equipment not being supplied during the term of the project. Professional Licensing

The draft Construction Code introduces a professional licensing requirement. A license is required for all professional practitioners engaged in construction, including engineering-research, project document preparation, construction-assembling and construction materials and products manufacturing. The draft Construction Code also requires the licensing authorities to (i) establish specific standards and requirements applicable to each category of professionals subject to licensing and (ii) create and with local participation. The draft Construction Code, while maintain a publicly available register of the licensed not crystal clear, appears to eliminate the local participation professionals. requirement. Professional Indemnity Conclusion Insurance Further discussion of the draft Construction Code is anticipated at the Milli Majlis, hopefully leading to improvement prior The draft Construction Code also requires professional to adoption, with a number of critical issues addressed and indemnity insurance to cover claims of professional negligence new innovative provisions introduced. These welcome in connection with licensed services. changes should make regulation of the construction industry more transparent, market-oriented and incentive-driven and Construction Investor effective. Natik Mamedov is an Associate in Baker & McKenzie’s Baku The draft Construction Code introduces the concept of a office. He is a member of the firm's Corporate and M&A, construction investor. This term, however, is not clearly Real Estate and Construction, IT and Telecommunications defined. From the few provisions in the draft Construction practice groups. Natik graduated with honors from Baku Code, it appears that not only the owner of the construction State University in 1992, and received his LL.M. degree in site but also contractors, subcontractors (such as construction Corporate Finance and Law from Widener University Law design and engineering firms), lenders and other parties School, Wilmington, Delaware, in 1996. He was admitted to providing financing or having an equity (through a joint the New York bar in 1997. Prior to joining Baker & McKenzie, venture) participation in the development project are deemed Natik Mamedov worked at several law firms in Philadelphia, construction investors and given the same protection afforded PA, Washington DC, NYC and Moscow. He also taught at the to the owner of the site. School of International Relations of Baku State University, and worked as a managing counsel at the National Bank of Foreign Participation Azerbaijan Vagif Karimli is an Associate in Baker & McKenzie's Baku Under current Azerbaijani law, foreign contractors and office. He is a member of the firm's Energy, Mining and design firms may engage in construction activities or Infrastructure industry group, Real Estate, and Antitrust and provide construction design services (i.e., those related Competition practice groups. Vagif graduated with honors to the preparation of construction project documents) only from the law faculty of Baku State University in 2004. He jointly with Azerbaijani citizens or Azerbaijani legal entities received his LL.M. in International Law from the same holding a valid license allowing them to provide these university in 2006 and a second LL.M. from Amsterdam Law services. However, these foreign service providers are not School at Universiteit van Amsterdam, the Netherlands, in required to conduct these activities through a joint venture 2007.

29 member contribution

A Clean Bill of Health: How to Obtain a Health Certificate

vaccinations from an authentic and reliable source such as Dr.Rajani Chandra-DMello NHS (UK), CDC (USA), etc. can exempt a person from re- Chief Medical Officer vaccinations if and when they become mandatory. Currently, Dr Ronald DMELLO there are no mandatory immunization schedules for adults in Director of the Indian Azerbaijan. Clinic What information is the applicant expected to provide for the doctor? Few people know exactly what is required in the way of medical Any medical complaint he/she has, medications the person tests to obtain a clean bill of health for the State Migration is currently taking, whether he/she has had any episodes Service (SMS). Indeed, one might argue that taking a test after of high fever lately and any other info the person thinks is one has already entered the country is a bit like closing the relevant and important for the doctor to know. stable door after the horse has run off. What languages are spoken by personnel at Hind However, to give you a clearer idea of what to expect, Klinikasi? AmCham member Hind Klinikasi (Indian Clinic) has provided Azerbaijani, Russian, English. the following information on the basis of its experience in conducting medical examinations and issuing the certificate of Under 'general blood/urine test', what exactly is tested? health required by the State Migration Service when you apply It is the full blood count, which gives the physician a fair idea for work and residence permits in Azerbaijan. of the presence of anemia, inflammatory processes or any allergic reactions in the body, etc. It is mandatory to provide a certificate from an authorized medical center, certifying the applicant to be “practically The "general urine test" checks for bile pigments in healthy”. Although the tests performed by medical centers urine, proteins, glucose, red & white blood cells, salts, to certify “practically healthy” may vary from center to center, microorganisms, etc. If we find something suspicious only in most cases, blood is tested for contagious diseases such then more detailed investigations are requested. as HIV, Syphilis, Hepatitis B, Hepatitis C and Tuberculosis. A general blood test and general check-up is conducted by What are the charges for the standard tests without a physician. Sometimes, at the discretion of the physician, complications and for issuing the certificate? additional tests might be ordered such as ECG (if cardiac At the Hind Klinikasi we charge AZN 75 for the tests, which ailments are suspected especially in the elderly) or a chest include: X-ray (if tuberculosis is suspected). However, in most cases which are uncomplicated, the whole process takes not longer 1. General blood test than a day. 2. General urine test 3. Tests for infections – HIV, Syphillis, Tuberculosis, Hepatitis B & Hepatitis C FAQs: 4. ECG 5. Physician’s consultation If the patient has a vaccination certificate which proves he/she has already been vaccinated against certain There is no charge for the certificate issued. diseases, e.g. Hepatitis A & B, TB, is he/she still required to be tested for these diseases? Our thanks to Dr. Rajani Chandra-D’Mello M.D., Ph.D. and Vaccinations are not a 100% guarantee that the person will Dr. Ronald D’Mello M.S. not contract the disease. Therefore even if the person is vaccinated he/she may still get infected (although the chances Dr. Ronald D’Mello holds a Masters in Vascular Surgery and is are fewer) or the person may have been infected even the Director of the Indian Clinic before the vaccination was administered. So the physician Dr. Rajani Chandra-D’Mello holds a Ph.D. in Obstetrics and issuing the certificate would like to be sure of the absence Gynecology, is a consulting ObGyn & Fertility Specialist and of infections before certifying to that effect. Certificates of also the Chief Medical Officer of the Indian Clinic.

30 Spring / Issue 9

member contribution

Legal Aspects of Commercial Leasing Vagif Ahmadov Contents of a lease agreement Associate Emma Silyayeva The minimum provisions to be contained in a lease agreement Associate, Salans Baku are the following: the amount and term of rent, the possibility to sublease the property, the obligations of the lessee in connection with the use of the property, the allocation of obligations concerning the restoration and repair of the If you are looking to rent office premises or a workshop, leased property and the return of the property to the owner this article is for you. We have attempted to highlight after termination of the agreement in the state defined in the some of the requirements of Azerbaijani law which are agreement. often raised by potential lessees of commercial real property. The law also binds lease agreement parties to requirements which may not be mentioned in the lease. For example, a lessee is not responsible for wear and tear on leased property Parties in a lease used for its designated contractual purposes. Also, the costs of maintaining and cleaning leased property are not recoverable As you probably know by now, foreign nationals and companies from the lessor. cannot own land under Azerbaijani law. As a corollary of this, foreigners cannot be lessors of land. The Azerbaijani state, Moreover, the leased property must be suitable for the municipalities and Azerbaijani persons (physical persons and uses outlined in the lease agreement, and the lessor must legal entities) can act both as lessors as well as lessees of land. continue to maintain the property in the lease. The lessor is also responsible for ensuring that the property has the Foreign nationals and companies can, however, be owners characteristics specified in the lease agreement and that and lessors of immovable property other than land, such as an the rights of third parties do not hinder the use of the leased apartment or a private house. premises.

A lessee must provide the lessor immediate notification of Title documents any incompatibility with the lease agreement uncovered by the lessee during the term of the lease and the necessity Obviously, it would be normal to expect that anyone offering to to take measures to protect the premises or its users from let premises on the basis of a lease has obtained a document unexpected danger. For example, notice must be given in the confirming the ownership of the premises. However, it is not event the lessor must rectify any defect. The requirement to so unusual to be offered the use of a workshop for which no provide notice is also required in the event third party rights are title documents are available. declared in respect of the premises.

As lease agreements must be notarized, one would expect notaries to inspect title documents prior to the notarization. Notarization and registration Our recent experience suggests, however, that not all notaries do this as rigorously as one would expect. For this reason, it Even though this requirement is sometimes questioned, under is necessary to check the ownership of the leased property in the Civil Code of Azerbaijan, a lease agreement in respect of order to avoid any claims from third parties. immovable property must be notarized. However, notarization is not required for an agreement to lease land from the state Currently, the ownership in respect of immovable property or a municipality. is evidenced on the basis of an extract from the Register of Immovable Property. The law has identified different forms of Where the lessee has a right to sub-let the immovable property, extract, depending on the nature of the immovable property. the notary should refuse to notarize the sub-lease agreement if For example, an extract for the ownership of land is different the main lease agreement itself is not notarized. An agreement from the extract confirming the ownership of an apartment. to sublease from a lessee of state-owned land must also be

32 Spring / Issue 9 member contribution

notarized. However, the consent of the state must be obtained terminate a lease agreement with immediate effect if the for the purpose of the conclusion of such lease. property substantially deteriorates and the lessor fails to remedy such breach. A lessor may also terminate with immediate effect The lease of immovable property for a term exceeding eleven if the lessee fails to pay rent or a substantial portion thereof for (11) months is also required to be registered. The state does two (2) consecutive months or if the lessee uses the property in not guarantee the protection and immunity of land rights which such a way which substantially violates the rights of the lessor. have not been registered. The current registering authority is the Registry Service of Immovable Property under the State If the term has not been defined in the lease agreement, it may Committee on Property Issues. be terminated only at the end of the year with six (6) months prior notice.

Preliminary lease agreement Under the Civil Code, an agreement to rent premises, for which the rent is paid on a monthly basis, may be terminated It sometimes happens that, although the parties want to proceed by three (3) months’ notice provided the notice to terminate is with the immediate signing of a lease, some time is required submitted on the first day of the first month (e.g., the notice is to prepare the lease. In this case, it is possible to conclude a submitted on 1 September to terminate a lease agreement as preliminary agreement to enter into the lease agreement within of 1 December). However, it appears that the Civil Code only the timeframes specified in the preliminary agreement. gives this right to a lessor.

The preliminary agreement must identify all major terms and The Law on Leases, which is one of the first legislative efforts conditions of the lease and must be concluded in the form to regulate the relationship between lessor and lessee, appears of the main agreement. As there is a requirement for lease to allow a lease agreement to be terminated in accordance with agreements to be notarized, the preliminary agreement to the agreement of the parties concerned. However, since this law lease premises must also be concluded in notarized form. was adopted prior to the Civil Code, the latter has precedence. It appears that the lessee could terminate upon three (3) months’ All preliminary agreements, including those applicable to notice only if this was acceptable to the lessor (e.g., if expressly leases of immovable property, must indicate the period within set out in the lease agreement), but not otherwise. which the parties undertake to enter into the main agreement – in our case, the lease agreement. If no period is specified, The leasing of commercial property can be an exercise having the main lease agreement must be signed and notarized many potential pitfalls for unwary lessees. However, abiding by within one (1) year from the date of the preliminary agreement. the requirements of the law is essential in order to have the assurance that there are no potential problems in the future. Subleases and Assignments

The lessee of premises cannot sub-let such property without the consent of the lessor. The law suggests that consent to sub-let to a third party may be withheld on objective grounds Vagif Ahmadov is an Associate with experience in corporate, relating to the identity of the third party. In any case, it is banking and finance, employment and property (real estate) advisable to include in a lease agreement a provision obliging matters. Vagif's work has also involved advising on foreign the lessor not to “unreasonably withhold” consent to sub- investment and project finance matters, and his background let. Alternatively, the lease can be negotiated to include the includes the full range of corporate and commercial matters specific conditions for sub-letting. in Azerbaijan. He taught comparative employment and public international law at Baku’s Western University in 2002-2004, as In general, the law suggests that the assignment of leases well as international arbitration law at Khazar University in 2006. of land or other immovable property is only possible with the Vagif graduated from the University of Greenwich (LL.B., consent of the owner or lessor of such land or property. It first class with honours, 1999) and from the University of appears to be possible to conclude a tripartite assignment Cambridge (LL.M. in International Law, 2000). agreement which contains the consent of the owner/lessor. Emma is an Associate and specialises in corporate and commercial law, mergers and acquisitions, employment and Termination of leases antimonopoly law, as well as intellectual property law. Her experience includes working with clients on issues of due According to the Civil Code, a fixed-term lease agreement diligence examinations concerning real estate and corporate terminates upon the expiry of its term. But under certain matters. Emma graduated from Baku State University law conditions a fixed-term lease agreement can be terminated faculty in 2004 and received her LL.M. from the University of prior to the expiration of its term. For example, a lessee may Caen, France, in 2008.

33 member contribution

Essentials for Benefiting from Double Tax Treaties

Emil Garayev Recognition of treaties by the Senior Tax Consultant Narmin Mirzazade Azerbaijan law Senior Tax Consultant, Deloitte Azerbaijan Article 2.5. of the Tax Code states the following: “Should any international treaty to which the Republic of Azerbaijan is a party provide for regulations that differ from those contained The following article has been prepared to give a brief in this Code and legislative acts established on taxes, the introduction of benefits which can be gained from provisions of said international treaties shall govern.” international income tax treaties to members of AMCHAM and companies considering investment opportunities Production sharing agreements signed between the in Azerbaijan. The article should not be considered as Government of Azerbaijan and major oil multinationals as a comprehensive summary of the income tax treaties well as Host Government Agreements signed for the Baku- signed by Azerbaijan and before application the reader Tbilisi-Ceyhan oil pipeline and South Caucasus Pipeline which must seek professional tax advice. became part of the Azerbaijan legislation also recognize the application of double tax treaties. Azerbaijan has entered into bilateral income tax treaties with over 30 countries. As of 1 May 2010 there were in force income tax treaties between Azerbaijan and the following countries: Taxes covered by treaties 1. Austria 13. Hungary 25. Romania 2. Belarus 14. Iran 26. Russian Federation Treaties signed by Azerbaijan typically cover profit tax, income 3. Belgium 15. Japan 27. Switzerland tax of physical persons, property tax and land tax existing under 4. Bulgaria 16. Kazakhstan 28. Tajikistan the legislation of Azerbaijan. Normally, taxes similar in nature to 5. Canada 17. Korea Republic 29. The Netherlands 6. China 18. Latvia 30. The United Kingdom those mentioned are also covered in the foreign treaty country. 7. Czech Republic 19. Lithuania 31. Turkey Therefore, it is important to note that indirect taxes like value 8. Estonia 20. Luxemburg 32. Ukraine added tax are not dealt with in the income tax treaties. 9. Finland 21. Moldova 33. Uzbekistan 10. France 22. Norway 34. UAE 11. Georgia 23. Poland 12. Germany 24. Qatar Beneficiaries of treaties This list is constantly updated. Some new treaties are being negotiated. Information about new treaties is available on the The treaty benefits are normally made available to “residents” web page of the Ministry of Taxes of Azerbaijan at http://www. of the treaty countries. Normally, a “resident” is defined as taxes.gov.az/. a person who, under the laws of that country, “is liable to tax therein by reason of his domicile, residence, place of Although each treaty generally deals with the same matters, management, place of incorporation or any other criterion of they are different in at least some respects. Therefore, it is a similar nature…”1. If a taxpayer happens to be a resident in important to focus on the terms of the specific treaty that may both countries, then the following so-called “tie-breaker” rules apply to a specific situation. help to define the residency of that person:

• permanent home; Purpose of treaties • centre of vital interests; • habitual abode; The income tax treaties generally pursue a number of • nationality; objectives with the main purpose being avoidance of double • mutual agreement of the contracting states. taxation of income by each treaty country. Most treaties provide clarification in certain issues which are ambiguously treated under the domestic legislation of the treaty countries. Another Rights of countries over major objective of the treaties is to provide for cooperation between the tax administrations of the treaty partners. income items

34 Spring / Issue 9 member contribution

Business income. Normally “business profits” of a foreign person employer which does not have a permanent establishment or are exempt from tax in Azerbaijan unless that person carries on a fixed place in Azerbaijan. 2 the business through its permanent establishment in Azerbaijan. Non-business income. Normally tax treaties eliminate or reduce A permanent establishment is typically defined to include a fixed the withholding tax applicable to investment type income such place of business, such as a place of management, a branch, as interest, dividends and royalties. It is commendable that an office, a factory, a workshop and a mine, an oil and gas well, some of the treaties signed by Azerbaijan in recent years a quarry, installation or structure or any other place of extraction provide for reduction of the Azerbaijan withholding tax on and development of natural resources. some of the non-business income items. For instance, the Azerbaijan/Luxemburg treaty reduces the 14% withholding tax Under Article 19.1. of the Azerbaijan Tax Code a timeframe rate applicable under the Tax Code to 5% or 10%.3 required for establishment of a permanent establishment in Azerbaijan is 90 days in any 12 month period. A great Capital gains. Tax treaties normally provide that capital gains advantage that an applicable treaty can avail to foreign may be taxed only by the country of residence. However, gains investors is to extend the time limit for establishing a permanent from the sale of personal property attributable to a permanent establishment in Azerbaijan. For instance, in accordance with establishment or fixed base may be taxed by the country where Article 5(2)h) of the Azerbaijan/Austria treaty a building site the permanent establishment or a fixed base is located. In or construction or installation project will result in creation of addition, gains from the alienation of real property or stock in a permanent establishment only if it lasts more than twelve a company the assets of which primarily consist of immovable months. property may be taxed in the country where the immovable property is located. Personal service income. Tax treaties provide for an exemption from tax in Azerbaijan for income from independent personal services performed in an independent capacity (e.g. as a Elimination of double taxation lawyer, engineer, accountant or architect) if such income is not attributable to a fixed place. Most of the treaties concluded In essence, there are two main methods of avoidance of by Azerbaijan also provide for an exemption for an expatriate double taxation: employee’s personal service income provided that the employee spends in Azerbaijan fewer than 183 days in any 1) The exemption method; twelve month period and the salary is paid by a non-resident 2) The credit method.

1 Article 4(1) of the Azerbaijan/UK treaty. member contribution

As per the exemption method, one of the countries exempts the to the income derived from Azerbaijani sources) approved by taxable income that has already been taxed in the other country. the tax authorities where the non-resident is registered and the The prevailing method to avoid double taxation is the credit Azerbaijan tax authorities. method; i.e. in order to eliminate double taxation, a treaty determines which of the countries has the primary entitlement The Rules also provide advance tax exemption for business to tax that income. The amount of tax normally payable to each profits provided that a division of a non-resident not forming country is calculated without regard to the fact that another country a permanent establishment is registered in Azerbaijan. Such may also be taxing it. Then, after the tax has been paid to the exemption is applied upon submission of a special application primary country, the secondary country will allow the earner to form DTA-04. take a tax credit for the amount of tax paid to the primary country, against the tax owed to the secondary country, but only up to the Other types of exempt income should initially be taxed by amount of tax paid to the primary country or the amount of tax way of withholding at the source of payment according due to the secondary country, whichever is less. to the statutory Azerbaijan tax legislation and then such If the tax paid to the primary country is equal to or more than the taxes may be refunded to the non-residents. For this a tax imposed by the secondary country, then the tax payable non-resident should complete and file DTA-06 form to the to the secondary country is eliminated. If the tax paid to the tax department where the payee of income is registered. primary country is less than the tax imposed by the secondary According to the Rules tax refund is executed within 45 days country, then the secondary country will receive the difference after the submission of the application. However, in practice between the two taxes. tax refund takes significantly longer and can sometimes be challenging.

Practical aspects of application Emil Garayev was born in 1984 in Baku. He possesses bachelor and master degrees in Law from Baku State University. He of treaties in Azerbaijan has been working in the Tax and Legal Department of Deloitte Azerbaijan for the last three years. His work focuses on Application of income tax treaties is governed by the Rules “On advising local and foreign investors on various tax and legal Administration of International Agreements for the Avoidance matters. Emil is well experienced in addressing complex of Double Taxation concluded between the Republic of tax issues relating both to domestic as well as cross-border Azerbaijan and other States” dated 19 November 2007 transactions. approved by the Minister of Taxes of Azerbaijan. The Rules stipulate two methods for benefiting from income tax treaties: Narmin Mirzazade was born in 1984 in Baku. She graduated from Baku State University successfully majoring in Law. • Application of treaty benefits in advance; She received her Master’s degree in Civil and Commercial • Application of treaty benefits retrospectively Law from the same University. In 2006 she joined Deloitte Azerbaijan. Narmin has more than three years' experience in Only interest, dividend and royalty income of non-residents from advising foreign and local companies on different tax and legal Azerbaijani sources may be exempt from taxation in advance. issues. She has participated in a number of tax due diligence For that a non-resident is required to provide the Azerbaijani projects, advised clients on a variety of tax and business payee of income with so called DTA-03 form (Claim for the issues and is currently in charge of a number of tax accounting exemption of tax or application of limited taxation with respect and filing projects.

2 Article 16.2 of the Azerbaijan/Germany treaty. 3 Article 12.2. of the Azerbaijan/Luxemburg treaty. Nuran Kerimov named Partner heading up Deloitte’s office in Azerbaijan Nuran Kerimov joined Deloitte in for BM International Law Firm, Ernst & Young and Salyan Oil 2003 to start the Deloitte tax practice Ltd. in Azerbaijan. He has devoted most Nuran holds a Master of Law (LL.M.) degree from the of his professional life to the practice University of Georgia, USA, and a Bachelor of Law degree of local and international taxation. from the Voronezh State University, Russia. He has significant experience in advising both international Nuran is an active member of the AmCham Tax Committee and Azerbaijani companies and which liaises with the Government of Azerbaijan on tax policy individuals on a variety of tax and and foreign investment protection issues. associated business issues. We congratulate him on his appointment and wish him Before joining Deloitte Nuran worked success in his new role and responsibilities.

36 Spring / Issue 9 AmCham Azerbaijan

The American Chamber of Commerce in Azerbaijan is a private, non-profit business About us association supporting and promoting the interests of business in Azerbaijan.

Established in 1996, AmCham is com- posed of over 220 members and asso­ ciates active in every sector of the Azer­ baijani economy. We represent 80% of all foreign investment, as well as a significant portion of local investment which allows us to promote American, Azerbaijani and multinational corpora- tions. This includes leading companies in Energy, Banking, ICT, Legislative/ Financial Consulting, Professional Ser­ vices, Education, Real Estate Develop- ment, Health, Transportation, Travel and Production fields.

An active and positive influence in Azerbaijan, we conduct our mission with integrity and respect for the country, observing all local laws and insisting Membership To apply on the highest ethical standards in all relationships and transactions. There are two types of affiliation with To apply for affiliation with AmCham, AmCham: Member and Associate. a candidate must submit a written application in the form adopted by Why join? Member status includes voting privileges the Board of Directors. Membership and eligibility for Board and committee applications are available at the Key member benefit – chairmanships in addition to the privileges AmCham office or on our website at best networking opportunities in granted to Associates. For affiliation as www.amchamaz.org. The application Azerbaijan! a Member, a candidate must be a legal form should be completed and sent to entity, registered and doing business in our office with the company registration As a member of AmCham, your Azerbaijan and be in good standing in the certificate issued by the Ministry of company has access to a vast network community, as determined by the Board Justice of Azerbaijan. of business information and contacts in of Directors. Azerbaijan and in the US government, A candidate meeting the objective and as well as valuable information on US A legal entity, branch or representative subjective requirements for affiliation businesses across Europe through office of a legal entity is eligible to be ECACC (European Council of American affiliated with AmCham as an Associate, with AmCham is accepted as either a Chambers of Commerce) and US subject to the Board of Directors’ Member or Associate upon receiving Chamber of Commerce. determination of good standing in the an affirmative majority vote of the community. Board of Directors and paying the first Additional Member Benefits include: year’s fee for the candidate’s category Associates are eligible to participate in of affiliation. Annual Employee Salary Survey various activities; receive our regular Quarterly Inflation Survey publications, including the Membership To maintain affiliation with AmCham, AmCham Membership Directory Directory, Annual National Employee Members and Associates must continue AmCham Resource Library Salary Survey and Quarterly Inflation to meet our eligibility requirements, be Survey. Associates, however, are not in good standing in the community, and For more detailed information please entitled to vote or serve on our Board be current with all financial obligations visit our website www.amchamaz.org of Directors. to AmCham.

37 AmCham Azerbaijan

AmCham Structure

Board of Directors Executive Committee

Dan Matthews President Baker & McKenzie

Stanley Escudero Alum Bati Ilgar Veliyev Movlan Pashayev Bob Dastmalchi Board Member Board Member Board Member Board Member Board Member Shieldbearer Wicklow Corporate Ernst & Young PricewaterhouseCoopers Chevron Services

Seymur Khalilov Wayne Walz Bakhtiyar Mammadov Donald Lu Teyba Guliyeva Board Member Board Member Board Member Ex-Officio Board Member Board Member BP Caspian Regional Halliburton US Embassy Societe Generale Oilfield Services Staff

Nargiz Nasrullayeva- Aysel Suleymanova Aylan Zaur Kerimov Muduroglu Member Relations and Aghamaliyeva Accountant Executive Director PR Manager Administrative AmCham Azerbaijan Assistant

38 Spring / Issue 9 AmCham Azerbaijan

Business Events Meet the Candidates Cocktail 18 February 2010 On February 18th, 2010 all AmCham members were invited to a cocktail party preceding our General Meeting to elect the 2010 AmCham Board of Directors.

At the cocktail each candidate had an opportunity to give a short, 3 minute speech to introduce themselves and present their individual election platforms : a summary of their pledges, reasons for standing for the AmCham Board and goals to be pursued during their term. Following this, the candidates took questions from the membership. Monthly Members’ Luncheons 24 February 2010 AmCham held its Annual General Assembly at the February Members’ Luncheon. Four out of ten members of the 2010-2011 30 April 2010 AmCham Board of Directors were elected by AmCham members, Continuing to review the topic of environment, we invited Mr. with voting taking place during the luncheon. Election results were Zakir Ibrahimov, Chairman of the Executive Board of "Tamiz announced immediately afterwards. We would like to congratulate Shahar" JSC (Clean City) to be our Special Guest Speaker. Alum Bati, Wicklow Corporate Services, Dan Matthews, Baker Heading one of Government's landmark environmental projects & McKenzie and Movlan Pashayev, Pricewaterhouse Coopers entrusted with the function of management, placement and Azerbaijan, on their re-election. We welcome new Board Member disposal of household wastes according to modern standards, Teyba Gouliyeva, Societe Generale, on board! as well as improvement of the overall environmental situation of the city, Mr. Ibrahimov updated our members on the work that Immediately following the elections, members were presented has been done to date, future plans, world practice and lessons with a snapshot of the Chamber’s 2009 achievements in a to be learned. Year In Review Address by AmCham President Dan Matthews. The program also included a presentation on "The Impact of Mr. Ibrahimov graduated from the Law Faculty of Baku the Global Economic Crisis on the Caucasus and Central State University in 1995. He started his carrier in Aztijaret" Asia" by Ms. Nienke Oomes, Mission Chief for Azerbaijan, JSC where he was a Leading Specialist in Law and International Monetary Fund (IMF) in Azerbaijan. Business Development from 1995 to 1998. In 1998 he moved to Azpetrol Group of Companies where he held 31 March 2010 various positions including Lawyer, Head of Procurement Our special Guest Speaker this month was Mr. Mukhtar and Special Projects Department until 2003. In 2003, Babayev, Vice President on Ecology of the State Oil Company Mr. Ibrahimov became a Deputy General Manager of of Azerbaijan (SOCAR). In light of 2010 being declared the EUPEC PipeCoating Azerbaijan Joint Venture. In 2004, Year of Ecology by President Ilham Aliyev, Mr. Babayev Mr. Ibrahimov re-joined Azpetrol Group of companies as briefed us on the environmental projects that will be carried Head of Strategic Research, PR, Marketing & Procurement out by SOCAR in 2010. Departments. In 2005 Mr. Ibrahimov was appointed General Mr. Babayev graduated from Moscow State University in Manager of Azpetrol in Moldova. 1991 and Russian Foreign Trade Academy in 2000. He started his career in 1991 in the State Economy Planning Since February 2008, Mr. Ibrahimov has held the position Committee of the Republic of Azerbaijan, moving on to the of Chairman of the Executive Board of "Tamiz Shahar" Ministry of Foreign Economic Relations between1992-1993. JSC which is the state-owned company operating in the Mr. Babayev joined the Foreign Economic Relations field of waste disposal and utilization services for Greater Department of the State Oil Company of Azerbaijan in Baku. 1994, Marketing and Economic Operations Department in 2003 and assumed the post of Vice President for Ecology Mr Ibrahimov is fluent in English, Russian and Turkish, and in 2007. has basic communication skills in Italian and French.

39 AmCham Azerbaijan

Committee Highlights Tax & Customs Committee ICT Committee AMCHAM’s Tax and Customs Committee has been very active this past quarter. The committee members have submitted their recommendations on Tax Code amendments to the Government of Azerbaijan. According to the majority of tax professionals involved, certain changes have been proposed to Articles No 13.2.12; 13.2.16.18; 13.2.14. 7; 102.1.8; 150.3.1; 150.3.2 and 204 of the existing Tax Code, subject to further consideration by the Parliament.

Within the framework of committee activities held in April, we invited Mr Idris B. Isayev, Head of the Finance-Budget Department of the State Social Protection Fund of the Azerbaijan Republic to be our Guest Speaker. Followed by a long Q&A session, Mr Isayev updated members on the results of the latest surveys, statistics and trends submitted and introduced by the agency.

As a part of the committee’s Best Practice session, AMCHAM membership is interested in international experience in terms of legislation regulating holdings as business structures. Considering the fact that business A presentation on “The real cost of illegal software” was entities in Azerbaijan are often structured as holdings, our made by the representative of Microsoft Azerbaijan Mr. Eldar membership is particularly interested in world practice, in Djangirov. Azerbaijan takes 6th place in the world on piracy legislative coverage, current law and regulations, as well as and illegal distribution of software. Igor Yakovenko proposed practical implementation. The above issue is of particular placing information related to this issue in the mass media and interest to tax professionals represented by the committee. writing a letter to the Ministry of Information and Communication In light of this, we are delighted to have representatives Technologies and the National Bank of Azerbaijan. of the IFC and Delegation for the European Union to the Republic of Azerbaijan as Guest Speakers at our next AZEL kindly hosted a joint ICT meeting on Monday, committee meeting. 19 April. The meeting featured representatives from Chemonics Mr. Craig Blakeley, Mr. William B.Garrison and Mr. Eldar Gocayev, who were eager to meet the members of AmCham.

The following questions were discussed during the meeting:

1. The current state of e-commerce in Azerbaijan: who is using it, how much is it being used, and what are the plans for using it in the future?

2. To what degree are the existing e-commerce laws and regulations in Azerbaijan helping or hurting the effort to develop a more robust e-commerce system?

3. Ideas from the committee members as to what changes in the legal and regulatory structure for e-commerce in Azerbaijan might assist in the development of e-commerce.

4. To what degree should e-commerce transactions be subject to, or exempt from, VAT?

40 Spring / Issue 9 AmCham Azerbaijan

HSE Committee HR Committee In light of the Presidential announcement, AmCham’s HSE The last meeting of the HR Committee featured Mr. Rizvan Committee has decided to dedicate 2010 to ecology. In this Kerimov, the Head of "Partnyor LLC" law firm and independent regard AmCham has already conducted a series of meetings contractor for a number of oil companies operating in Azerbaijan. with the management of EKOL and Tamiz Shahar. EKOL is a Mr. Kerimov provided information on some relevant topics and Closed Joint-Stock Company established in 2006 according to responded to members’ questions on labor regulation issues. the agreement signed between SOCAR (51%) and a foreign The second part of the meeting covered discussion around the investor - «Lancer Services S.A» Company (49%). The main perspectives of HR Committee work in 2010, its main directions purpose of the company is to carry out environmental protection and challenges. The following issues were raised by the services by applying modern technologies within and outside committee administration: of the Republic. Tamiz Shahar was established in accordance with the Decree on “Improvement of Solid Municipal Waste • Summer students and interns – share practices and Management in Baku City” in 2008 by the President of the presentations Republic of Azerbaijan. Pursuant to this decree “Tamiz Shahar” • Labor inspections: dos and don’ts JSC was entrusted with the disposal, including placement and • Employment of disabled employees – statutory deactivation, of solid household waste generated in the territory requirements and how the HR community/ committee can of Baku and its suburban settlements. contribute. Related cooperation with the HSE committee. • Recruitment agencies – short presentations, introductions. Following our discussion, the following joint projects are • Changes in pension legislation – pros and cons. proposed for implementation by EKOL, Tamiz Shahar and the AmCham HSE Committee this year: It is also planned to widen the scope of HR committee activity by means of developing inter-committee cooperation and being 1. A series of training sessions on ecology along with a more active in the community. drawing competition for school children (May 2010) 2. Summer School for university students (May/June 2010) 3. Joint Tree Planting Action in areas where most of the oil & gas companies are located (October 2010)

The committee has held a number of meetings since January 2010, one of which featured Mr Rushtu Safarov, the Director of the State Industrial Safety and Mining Supervision Agency (SISMSA) and Azerbaijan State Scientific Research Institute for Safety and Labor Protection. Making Labour Safety a special focus, Mr. Safarov gave us a brief overview on the role and mission of the structures headed by him. We are also pleased to inform you that following Mr Safarov’s speech during the HSE meeting, AmCham is considering translating and publishing some of the books issued by the agency he represents. Striving to provide our members with the best information resources, we believe that HSE professionals will benefit from this valuable BFI Committee data. Issues discussed by the committee included:

• Life and endowment insurance in Azerbaijan – a practical framework was presented by Ateshgah Insurance. The legal framework of this topic was presented by PricewaterhouseCoopers • Financial services sector development in Azerbaijan was presented by Samir Balayev (Unibank) and Viladi Maniyev (AIG Caspian).

AmCham’s BFI Committee invited a representative from the Ministry of Finance, Zeka Mirzayev, Head of Insurance Market Regulation Sector at the Department of Financial Markets Regulation, to attend the meeting. As insurance issues fall within the scope of the HR Committee, this meeting will be a joint committee meeting.

41 AmCham Azerbaijan

Members’ News and Events New GM for Park Inn/Radisson Baku welcomes Mr. Stefan Kuehr degree in Business Management from the University from Austria who takes up a of Applied Sciences. Mr. Kuehr has worked his way up position with The Rezidor Hotel from internships in various organisations to Chef de Group as General Manager of Bar in Corsica, Sales Manager in Austria, Restaurant Park Inn Azerbaijan & Radisson Manager on river cruises in Switzerland, Catering & Blu Plaza Baku. Mr. Kuehr has Event Manager in Austria, Director of Food & Beverage attended Higher Vocational and Executive Assistant Manager/Hotel Manager in Park Schools for Tourism and Catering Inn Pulkovskaya, Russia, followed by the post of GM at in Austria where he was awarded Park Inn Almaty Airport Hotel, Kazakhstan. He brings an the title “Diplomierter Hotel- & impressive resume and experience to his new position, Touristikkaufmann”. He has a and we wish him all the best. AmCham bids farewell to AUA Country Manager Wolfgang Groeger Mr. Wolfgang Groeger is leaving Baku after spending 4 which offers event management, years here as Country Manager of Austrian Airlines. He consulting and import-export. began his career with AUA in Vienna in 1972, followed by Mr. Groeger has been a loyal a stint in Libya, as Station Manager (Tripoli) and Regional and valued member of AmCham, Manager (Libya) from 1984 to 1988. and we wish to thank him for his unstinting support of the Chamber This was followed by 7 years in New York, until 1995, where and all its activities. He served as he opened the Austrian Air Station at JFK International Chairman of the Travel, Hospitality Airport. From 1995 to 1998, he served in Prague as and Tourism Committee, and Country Manager in the Czech Republic. His job then took sponsored many AmCham events. him to Bucharest, again as Country Manager for Romania We are sorry to say goodbye and and Moldova. He came to Baku in 2006. He is moving to wish him and his family the very Florida, where he will run his own business, “IMEX4U” best for the future. On 1 March 2010, PwC Legal, operating as part of the Tax & Legal Department of PricewaterhouseCoopers commenced activities PwC legal team is headed by Farhad M&A, due diligence, share transfers, equity financing, lending Hajizade, a law professional with transactions, international arbitration and contracts law. fourteen years of both local and He also has extensive experience in representing clients in international legal expertise and negotiations with business counterparts and government experience. agencies (Cabinet of Ministers, ministries, state committees, state funds etc.). Before joining PwC with his own law practice, he was the managing Farhad’s contact details are: partner of a regional law firm for 4 Farhad Hacizade years. Prior to that, he worked as e-mail: [email protected] chief legal council to an oil company, Phone: 994 12 497 2515 ext (1182) the largest mobile operator in the country, as senior associate at an international law firm and as legal advisor to the Government of Azerbaijan.

Farhad's expertise primarily covers corporate and commercial PricewaterhouseCoopers Azerbaijan law matters in such areas as oil & gas, telecom, infrastructure, celebrates its 15 year anniversary in 2010 construction and aviation, with specific focus on restructuring,

42 Spring / Issue 9 AmCham Azerbaijan

Projects

AMCHAM is pleased to introduce Inflation Survey – Consumer Price Index the first Consumer Price Index April 2010 report for 2010. The figures for Q1 are pretty impressive: CPI only rose by 0.67% for Azerbaijani Breakdown of AAIP changes (the base is 100 at 31 March 2006) consumers and 0.79% for Expatriate consumers. However, III Q/2009 IV Q/2009 I Q/2010 the largest upward effects came from Fruits & Vegetables and Non-durable household goods where prices rose by 4.55% and 2.69% respectively. Over the last twelve months (the base is 100 at 31 March 2009) the inflation is still 6.25 % for Azerbaijani consumers and 6.94% for Expatriates. We hope that this report, created exclusively for the benefit of our members, will assist you in your budget analysis and forecasting. A copy of this report is available in the "Members only" section of our website. Please let us know if you need a password reminder to access this section.

AmCham Azerbaijan

AmCham Corporate Social Investment ECOLOGY As a part of our Corporate Social contribution AMCHAM HSE Committee, in cooperation with EKOL Engineering Services conducted a series of trainings on ecology in schools No 20, 23, 6, Zarifa Aliyeva School and SOS Children’s Village. According to a Presidential decree, 2010 has been declared the Year of Ecology, so the committee has worked to increase the level of awareness on ecological issues among schoolchildren. A presentation was delivered by Magsud Babayev, Head of the Ecological Monitoring Department (Mobile Division), who has been working for the Ministry of Ecology and Natural Resources for many years and is recognized as one of the leading specialists in the country. In his presentation Mr. Babayev gave an overview of the unique natural heritage of Azerbaijan and the importance of preserving exhaustible resources. We were gratified to have Mr Kamil Akimov, Advisor to the General Director of EKOL and former Minister of Energy of the Azerbaijan Republic as our Honorable Guest. He shared a number of interesting facts about the history of oil and gas. At the end of the presentation the children were presented with informative brochures published by AmCham HSE Committee and corporate gifts generously donated by EKOL.

We would like to extend sincere thanks to our committee members Sabuhi Rzayev from KBR, Nariman Aliyev from Panalpina and Ilham Kerimov from Cross Caspian for their valuable contribution to this project. Special thanks go to EKOL for their outstanding work and incredible input to this exciting initiative! In line with the AmCham Corporate Social Responsibility mission, our HSE Committee has issued informational brochures "Preserve the Nature!" teaching schoolchildren how to save exhaustible natural resources. The brochure emphasized the importance of saving water, energy and paper, and described ways in which children could do this. The brochures were distributed among 8th, 9th and 10th grade classes in a number of city schools. We would like to thank our committee members KBR and Panalpina for their financial support in publishing this educational literature.

BUSINESS Continuing to support business directed projects, AmCham traditionally allocates funds to the Business Case Competition organized by the Azerbaijan Alumni Association. As in previous years, we donated 3000 AZN to this featured event held in May its successful experience in delivering up-to-date economics 2010. The history of ABCC goes back to 2002: motivated by and business programs, Junior Achievement Azerbaijan the lack of business case analysis practice in Azerbaijan, MBA offers interested companies a partnership within the School Enterprise Corps Volunteers spearheaded this project. AAA Economics Education Program (SEE) in 2010-2013 with the was given the exclusive right to hold and organize the ABCC. In total requested budget of $575,851 ($191,950 annual budget). the past, around 300 qualified students have participated in the The program’s target audience will include secondary school ABCC. Today, the past participants of ABCC hold leadership students in grades 9-11, college students and educators. positions in many businesses and organizations in Azerbaijan. The SEE brings theoretical and practical knowledge of basic economic and business components to secondary school and EDUCATION college students and fosters work-readiness, financial literacy, An additional 5000 AZN gathered during the auction at and entrepreneurship skills. The program helps develop the AMCHAM 6th Annual Black and White Ball will go to the Junior business workforce through economic and business training for Achievements School Economics Education Program. Using students and teachers.

45 AmCham Azerbaijan

6th Annual Black & White Ball AmCham hosted its 6th Annual Black& White Ball on Friday, 21st May 2010. This was yet another spectacular event to light up Baku’s social scene, themed ‘AmCham on Park Avenue’. This event gave Chamber members and guests an opportunity to entertain friends, clients, colleagues and business associates in a very unique environment: the 20th floor of the Landmark Hotel. AmCham offered the ultimate urban experience on the penthouse floor of Baku’s tallest building, treating guests were to a stunning bird’s eye view of the city by night. Along with a gourmet four course dinner prepared by the Landmark Hotel, guests enjoyed an exclusive program including an outdoor champagne cocktail reception, live entertainment during the reception and dinner, dancing till dawn with a live band and a DJ and a surprise prize draw This prestigious black tie event with over 260 people in attendance was one of Baku’s most high profile social functions providing the best visibility for companies. We were pleased to provide a number of sponsorship opportunities to showcase businesses to a distinguished audience of Baku’s leading decision makers. We wish to thank our grand sponsor Azerfon-Vodafone, main sponsors Garadagh Cement, Lufthansa and Microsoft and all the member companies which generously sponsored various parts of the program, and contributed to its success.

46 Spring / Issue 9 AmCham Azerbaijan

47 AmCham Azerbaijan

(M2M) Discount Program HYATT HOTELS BAKU 3M 15% off in all restaurants and 10% on following 3M products: bars. 15% off on all laundry and Visuals (Digital and Rear Projec- TM dry cleaning services tion Film); Construction; Stationary (Post It, Scotch) ATA HOLDING Up to 15% on all types of insurance PHILOSOPHY TRAVEL AZEL 5% on any travel arrangements Up to 10% on all products PARK INN LUFTHANSA 10% in all F&B Outlets. Up to 7% for tickets (access to the business class lounge in H.Aliyev Airport RADISSON included) 10% on all Published Retail Room Rates SEABAK Up to 10% for onsite helpdesk OFFICE SYSTEMS support Up to 15% for remote 10% on all office chairs administration 15% on office furniture (excluding metal) WICKLOW CORPORATE SERVICES MOZAIK LLC 5% discounts on hourly fee rates 10% on all our products EXCELSIOR GARANT SIGORTA 15% on Duke and Heritage rooms Up to 20% on various types of 15% for rentals of conference insurance rooms; 10% on all catering contracted with rentals; 10% on F&B in Belvedere Restaurant; BAKER & PARTNERS 20% on one year membership in Up to 25% on various services Aura Spa

ALTES GROUP INDIAN CLINIC 5% for all Altes Group apartments Up to 15% on medical services portfolio CRESCENT BEACH HOTEL AG BANK 10% for Accommodation; 10% 50% on AG Club Premium Food & Beverage; 15% discount Package; 20% on AG Club Gold on accommodation & all F&B HEI Package

How to join the Program: Members willing to join the Program and offer their products/services at special discount to AmCham Regular Members have to inform the AmCham office in writing. A discount provider has to indicate the product(s) or service(s) and discount rate(s). How to obtain discounts: All Regular Members, no matter whether they provide discounts as part of the Program or not, can obtain discounts. Members can find information about the discounts in the M2M Section of our website www. amchamaz.org How is M2M advertised? The program will only be advertised internally through the AmCham communications channels: AmCham Website and AmCham Quarterly Magazine – “IMPACT Azerbaijan”. Note: The cards are for personal use only. A card holder is committed to return the card to AmCham in case he/she leaves a Member establishment.

48 Spring / Issue 9