Content: 3 Top story bne:Invest in Azerbaijan 6 Corporate statement 7 Interview 9 Feature 12 Sector 14 Economics & finance 17 Chart 18 News in brief May 2015 Follow us on twitter.com/bizneweurope www.bne.eu AZPROMO is the main partner of the bne:Invest in Azerbaijan newsletter. www.azpromo.az Photo: Maastricht School of Management AZPROMO promotes ties with Southeast Asia, the Low Countries In April, the Azerbaijan Export and Investment of AZPROMO, in that it encouraged more Promotion Foundation (AZPROMO) hosted a investment and trade between the two countries. bilateral business forum Singapore-Azerbaijan. The gathering attracted 50 companies Trade levels between Singapore and Azerbaijan representing sectors like pharmaceuticals, remain low, at an estimated $42,000 in telecommunications and IT, logistics, oil and 2013, although Azerbaijani companies are mining equipment, industry, and power, among increasingly looking at Singapore as a gateway others. The Singaporean delegation to Baku to the fast-growing Southeast Asian market. was led by the CEO of Kenetics Innovations, State sovereign wealth fund SOFAZ set the Ken Wong, whose opening speech at the forum trend for greater investments in that region in echoed that of Rufat Mammadov, President 2013, when it began acquiring real estate in Multilateral strategic Azerbaijan Export & Investment partner Promotion Foundation bne:Invest in Azerbaijan May 2015 Page 2 East Asia and reported interest in acquiring The event gathered together 250 delegates from properties in Singapore, Malaysia and Indonesia. both countries, including representatives of 27 Diplomatically, Azerbaijan and Singapore have Azerbaijani and 60 Dutch companies. In addition seen a strengthening of ties in the last three to the ministers of economy, Shahmar Movsumov, years, thanks to high-level visits such as that CEO of the Azerbaijani sovereign wealth fund of the Azerbaijani head of state, Ilham Aliyev, to SOFAZ, Dutch senator and chairman of the Singapore in November 2012. Maastricht School of Management René van der Linden, and Twan Beurskens, vice-governor of the New highs with the Low Countries province of Limburg were in attendance. On the other side of the continent, in Maastricht, Netherlands, AZPROMO, the European The Netherlands is one of the most important Azerbaijan Society (TEAS), and the Netherlands investors in Azerbaijan’s non-oil economy, Council for Trade Promotion (NCH) came ranking second after Turkey with a foreign together to organise a Dutch-Azerbaijani direct investment (FDI) stock worth $800mn. business forum. Events like this year's business forum, which is a follow-up to the first edition organised in Baku According to Azerbaijani Minister of Economy last year, aim to promote further investment in Shahin Mustafayev, Shell's involvement in the areas like horticulture, logistics, waste and water EU’s Southern Gas Corridor project and the management, and sustainable energy. presence of 125 Dutch companies in Azerbaijan reflect the strong commercial ties between the Following suit, neighbouring Belgium sent a two countries. business delegation to Baku late last month. AZPROMO hosted the delegation that was led Meanwhile, Dutch Minister of Economic Affairs by Secretary of State for Foreign Trade Pieter Henk Kamp emphasised the similarities between De Crem, as well as representatives of 80 local the two countries in his keynote speech. "Whilst companies active in agriculture, food processing, geographically distant, our countries have much telecommunications, logistics and consulting. in common. We both have a strong agricultural Sahil Babayev, the Azerbaijani deputy minister of industry, and the energy industry has had a economy and industry, noted that bilateral trade major impact on both our economies. Azerbaijan increased by 30% in 2014 and by 66% in the first is trying to diversify its economy and stimulate quarter of 2015, up from $61.3mn in 2013. While rural development. The Netherlands is trying to in Baku, De Crem also met with the CEO of state recover from the financial crisis by investing in energy company SOCAR, Rovnag Abdullayev, industries with great potential for growth. These signaling an interest in possible partnerships in mutual interests are the basis of our ties." oil& gas between the two countries. Multilateral strategic Azerbaijan Export & Investment partner Promotion Foundation bne:Invest in Azerbaijan May 2015 Page 3 Top story ADB increases project finance for Azerbaijan as delegates gather in Baku For four days in early May, Baku became Asia's The agenda also addressed recurrent issues capital as it hosted the 3,000 delegates that facing Asian countries, such as environmental came to attend the Asian Development Bank degradation, the urban sprawl in Asian cities, (ADB)'s 48th annual meeting. High on the agenda women's participation in the workforce, regional for the meeting was providing assistance for cooperation in Central Asia, and poverty Nepal, which had suffered a deadly 7.8-degree alleviation. In his closing statement, Takehiko magnitude earthquake days earlier. The gathering Nakao, the bank's Japanese president, noted delivered solutions to the crisis in the form of that Asia's fast economic growth has yet to reach a Partnership Forum for Nepal, the pledge of an estimated 1.4bn Asians living in absolute $200mn in reconstruction aid, and plans for a poverty. As such, the bank "needs to squarely conference with development partners dedicated address the issues of quality of growth and exclusively to reconstruction in Nepal. inclusiveness," he concluded. Multilateral strategic Azerbaijan Export & Investment partner Promotion Foundation bne:Invest in Azerbaijan May 2015 Page 4 The meeting served to announce some internal Since 1999, the ADB has focused most of its changes in the bank, namely the merger of its cooperation with Azerbaijan on improving Asian Development Fund lending operations infrastructure. To date, the bank has with its ordinary capital resources balance financed the construction of flood mitigation sheet. The move is expected to increase ADB's infrastructure, of 200km of highways and rural annual lending by 50% a year, up to a total roads, improvements in rural water distribution $20bn. According to Nakao, "the stronger lending networks, and enhanced power transmission capacity offers an opportunity, but we must use projects to reduce power outages. it well. We are already actively working with our client countries to identify new projects and Looking ahead, the ADB will continue to finance programmes for our finance." infrastructure and transportation projects, both within Azerbaijan and in Central Asia and ADB and Azerbaijan the Caucasus. Last year's CPS for Azerbaijan One of the countries to benefit from the mentions the provision of sewerage services increase in the ADB's project financing capacity in rural areas, which currently only cover 32% is host country Azerbaijan, which signed an of those communities, as one of the future agreement for $1bn with the Manila-based priorities. The ADB is also working with the institution to rehabilitate and expand its power government and the World Bank on an integrated distribution network. One of the signatories, solid waste programme for the regions, which is state-owned Azerishig, will carry out the to be completed this year. programme to upgrade power distribution lines, substations, customer service lines, and Within the capital of Baku, the bank will continue to replace electric meter devices with digital its collaboration with the government on an ones. ADB is to disburse $750mn in multiple urban transportation project and is exploring the tranches for this purpose, while the Azerbaijani possibility for public-private partnerships (PPPs) government will contribute the remaining for it. Altogether, the infrastructure projects $250mn. According to ADB Vice President planned under the CPS amount to an impressive Wencai Zhang, "Azerbaijan's power sector plays $715mn in financing that ADB has earmarked a leading role in the economy and the proposed for Azerbaijan by 2018, on top of the $750mn programme will further improve electricity recently allocated for the power sector. delivery to customers." The ADB works with Azerbaijan in the framework The ADB has been supporting Azerbaijan since of CAREC, the Central Asia Regional Economic 1999, granting the country 23 loans and three Cooperation, a partnership between 10 countries grants to date, which totaled $2bn, assisting it and six development partners that works to in 32 technical projects and conducting seven improve competitiveness and increase trade private sector transactions worth over $160mn. among its member countries, to support capacity In 2014, the ADB developed a four-year country building through a regional institute, enhance partnership strategy (CPS) for the Caucasian security and energy efficiency, and to establish country to promote inclusive growth, rural regional investment priorities and technical development and to diversify the economy. assistance projects. As of 2013, CAREC had Multilateral strategic Azerbaijan Export & Investment partner Promotion Foundation bne:Invest in Azerbaijan May 2015 Page 5 received $22.4bn in project finance for over 160 and registration procedures for bond issues. projects. Among them, the six transportation The move comes after the European Bank for corridors CAREC 1 through 6 stand out as having Reconstruction and Development’s (EBRD) had the greatest impact on facilitating trans- announcement