Baku, Azerbaijan, Sept.25
By Leman Zeynalova – Trend:
Trend's exclusive interview with Wiebke Schloemer, Regional Director, Europe and Central Asia, IFC
Question: What measures have been taken by IFC recently to support the development of private sector in Azerbaijan? What is the volume of investments made by IFC in Azerbaijan since the start of cooperation?
Answer: As the largest global development institution focused on the private sector in emerging markets, IFC leverages the power of private businesses to help end poverty and boost shared prosperity.
In Azerbaijan, we have been supporting the private sector for more than two decades, committing close to half a billion USD, including mobilization, in 56 projects. We have also supported around $100 million in trade through our trade finance program and provided $250 million for the Baku-Tbilisi-Ceyhan pipeline. IFC has also implemented a range of advisory projects aimed at encouraging private sector growth.
Since we started working in Azerbaijan in 1995, we have led the way in a number of areas. We made the first foreign direct investment outside of the oil sector in Baku Coca-Cola Bottlers. We were also the first to invest in a foreign bank, Kocbank; in a microfinance bank, AccessBank; and in an international hotel chain, Hyatt. With all these projects, we focused on supporting private sector growth and helping Azerbaijan reduce its reliance on oil.
With advice from IFC, the government of Azerbaijan has implemented a series of regulatory reforms to improve financial infrastructure and enable more small businesses to access credit. As part of these efforts, the government adopted a modern law on credit bureaus, enabling the creation of the country’s first private credit bureau in 2018. That has helped improve the quality and range of credit information, reducing financial institutions’ risks and facilitating more lending.
The project has also helped develop a secured transactions law that allows small businesses, which often lack assets like real estate, to use their movable assets, including inventory, accounts receivable, and equipment, as collateral. As a result of the reform, a movable collateral registry was created. According to the regulator of the financial sector, since its launch in March 2018, lenders in Azerbaijan have filed notices to the registry for loan applications from 32,000 borrowers, including smaller businesses, enabling these businesses to obtain easier access to financing.
That work was driven by the Azerbaijan Financial Infrastructure Advisory Services project, a 10-year effort supported by Switzerland’s State Secretariat for Economic Affairs (SECO).
The reforms also helped Azerbaijan get into the list of 10 economies showing the biggest improvement in performance in the last World Bank Group Doing Business Report, released in October 2018, which looks at the business climate in 190 economies around the world. The country had carried out eight reforms, the highest number by an individual country.
Q.: What are the main directions of IFC’s cooperation with Azerbaijan? Do you have or are you planning a new strategy for collaboration with Azerbaijan for coming years? What are IFC’s short-term plans for the country?
A.: Our country partnership framework, which covers fiscal years 2016-2020, sets out the World Bank Group’s strategy in Azerbaijan, to help the country on its path toward sustainable, inclusive, and private sector-led growth.
To increase the role of the private sector, IFC works with Azerbaijan’s government to make it easier for companies to do business and invest in Azerbaijan’s non-oil economy. We support the government by bringing international expertise into the country in the areas of business regulation and investment policy and promotion, and we help enhance the competitiveness of the agricultural sector, a key source of jobs.
We are also helping to streamline regulations and modernize the national food safety management system through the World Bank Group’s Azerbaijan Investment Climate and Agribusiness Competitiveness project, which is implemented by IFC and supported by SECO and Austria’s Ministry of Finance.
Separately, our Electronic and Digital Financial Services project works to help boost financial inclusion by improving access to digital financial services for individuals and smaller businesses, helping them grow and create jobs. The work includes help in introducing modern e-banking services in the country. That will improve access to financial services for customers who find it difficult to access branch-based services, through the development of a legislative and regulatory base. It will also provide institutional and market support to help build an ecosystem conducive to the digitization of financial services.
IFC has been investing in Azerbaijan for over two decades and we continue to explore opportunities for direct investments to private sector companies in the country, as well as to financial institutions for on-lending to small and medium enterprises.
Finally, IFC is committed to supporting the government in structuring pilot public-private partnership projects. We can help attract private investment through PPP transaction advisory support, as well as structure pre- and post-privatization investments, offering our vast global experience in structuring PPP projects in various sectors.
Separately, as you may know, the State Oil Fund (SOFAZ) partnered with IFC in 2013 and has committed $350 million to three funds managed by the IFC Asset Management Company. SOFAZ was the first investor from an emerging market to invest in funds managed by the IFC Asset Management Company.
For IFC, working with responsible and visionary investors is crucial. Through mobilization, we can increase the impact we have, expanding our efforts to reduce poverty, create jobs, and tackle climate change. SOFAZ is one of those investors which shows leadership in their commitment to this goal and by dedicating their 20th anniversary to impact investment confirms this allegiance. We value this partnership with SOFAZ and Azerbaijan and look forward to continuing and expanding it.
Q.: How does IFC help Azerbaijan attract investments in its private sector?
A.: To help attract investment and foreign direct investment (FDI), in particular, to Azerbaijan’s non-oil sector and boost diversification, we are supporting the state as it develops a national FDI strategy. That includes upgrading the legal and institutional framework for investment policy and promotion. We are also supporting the government in its work on a new investment law that will promote knowledge transfers and make it easier to access capital.
In addition, IFC is helping the state build an efficient risk-based inspections system and ensure sustainable permitting regime reforms to help save time and resources, both for the private sector and public sector agencies, while continuing to ensure the highest level of safety.
We believe Azerbaijan has tremendous economic potential. Strategic reforms can create conditions that go a long way towards helping the country realize its promise and, hopefully, usher in a new era of prosperity.