Azerbaijan - United World

Transcription

AZERBAIJAN usat 1-4 OK SERGIO.qxd
9/2/07
Oil
16:46
Página 1
Economy
Page 2
Huge reserves and
the new BTC
pipeline make
Azerbaijan a key
energy player
Page 3
Telecoms
Channeling billions
of petrodollars into
telecoms, industry,
agriculture and
infrastructure
Page 8
Baku and
Washington seal cooperation agreement
to strengthen fastgrowing ICT sector
OurWorld
This supplement to USA TODAY was produced by United World LTD.: 4410 Massachusetts Ave NW, Washington - DC 20016 - Tel: 1-202.347.9022 - Fax: 1-202.347.9025 - www.unitedworld-usa.com
WEDNESDAY, FEBRUARY 28, 2007
Azerbaijan
THE COUNTRY
IN FIGURES
The land of fire
Economic reforms, record oil prices and the recent opening
of the strategic Baku-Tbilisi-Ceyhan pipeline usher in an era
of exceptional economic progress for Azerbaijan
TOWARDS the lion people is making true ecoend of the Bronze nomic headway.
Age, a land
Independent from the Soviemerged from the contest be- et Union since 1991, Azertween the forces of light and dark- baijan is not just another
ness. Its name, Adar-Bad-Agan, emerging market. It is about
meant “the country protected by to become a key player in the
fire”. The Zoroastrians, who global energy exchange. With
came to populate this littoral part the Baku-Tbilisi-Ceyhan
of the Caspian Sea in the sixth (BTC) pipeline, the décor is set
century BC, worshipped fire for a new economic bonanza.
(known as Adar) as one of the Its offshore oil and gas fields
four cosmic elements. At the time, pumped up nominal GDP by
the coastline was ablaze with gas 11.5 percent in 2005 to $11.3
flares from the prodigious hy- billion. In the first half of
drocarbon reserves in the seabed. 2006, GDP grew a whopping
Today, the coun- The nation’s position 30 percent. With
try is known as
prices even
as a key strategic oil
Azerbaijan.
higher in 2006,
Azeri history is ally of the U.S. and the inflows of
rich in legend. As EU is firmly based on petrodollars are
a transit point
altering the landmutual accord
along the Silk
scape. New office
Road, it was
towers and resiprized for the pudential buildings
rity of its saffron,
grace the skyline.
gold and silver.
Baku is again a
Marco Polo obcosmopolitan
served the first oil
Riviera town, just
exports from the Absheron Penin- like it was in the days of John
sula in the 13th century. Back D. Rockefeller.
then, petroleum was used for
Former president Heydar
lighting and medicinal purposes. Aliyev deserves much of the
Natural resources have always credit for setting up the State Oil
included oil and gas. Also, iron Fund in 1999, which helps sterores from the mountains were ilize inflows of capital, thus prebehind the early metallurgical venting distortions in the national
furnaces and rapid industrializa- accounts. It is not only a unique
tion in the 19th century.
macroeconomic tool, but also a
Today, Azeris are proud that guarantee that money is allocattheir small country of eight mil- ed to value-creating enterprises.
OFFICIAL NAME:
Republic of Azerbaijan
Mr.
Aliyev
backed a wideranging reform
program, supported
by
the
IMF/World Bank,
that brought the New inflows of petrodollars are altering the landscape in the Azeri capital of Baku.
economy back on
its feet after 1995. Policymakers
here are realists. They see oil and
gas exports as a way to inject the
domestic economy with longterm potential. Non-oil sectors
such as banking, telecommuni AZERBAIJAN is not easy stitution-building, transparencations, cotton, food-processing,
to pigeonhole, but for a pre- cy and improvements in the
construction and agriculture have
dominantly Muslim country, business climate.
been the first to kick back.
it has a strong secular tradi“President Aliyev’s visit to
Squeezed between Russia and
tion akin to Turkey. For cen- the U.S. has given a new imIran, locals are adept at maxituries it was a gatekeeper petus to bilateral cooperation,”
mizing geography. Azerbaijan is
between east and west. With says Elmar Mammadyarov,
a key strategic ally of the U.S.
the coming on-stream of the Minister of Foreign Affairs.
and EU. As an emerging democBaku-Tbilisi-Ceyhan (BTC) About 90 percent of export
racy, it is also a member of the
pipeline in July 2006, the coun- receipts are derived from oil
Council of Europe. Since the “contry has now graduated to glob- and gas. But Mr. Mammadtract of the century” was signed
al energy player. In yarov sees long-term proswith foreign oil companies, the
Washington, Baku is back on perity in future transactions
production sharing agreements
the radar screen.
such as machinery, cotton, silk
have generated $7.5 billion.
“Azerbaijan has been coop- and foodstuffs. The energy
The current president, Ilham
erating with the U.S. in vari- corridor opened by the BTC
Aliyev, has opened the BTC to
ous fields including energy will accelerate the transfer of
exports of other Caspian naprojects like the BTC, eco- know-how. For Stanley Estions. Thus, the BTC brings adnomic development and secu- cudero, a former U.S. amditional oil to Mediterranean
rity issues,” says President bassador to Azerbaijan and
markets and helps keep prices
Ilham Aliyev, who visited the currently at the head of the
in check. Now the challenge is
White House in April 2006. American Chamber of Comto use these tremendous oil revThe country is perceived as a merce, the time is now. “It’s
enues to properly develop the
multicultural guarantor of sta- clear that the U.S. is aware of
nation’s infrastructure, educability. The U.S. has backed the the need to entertain a closer
tion and training, as well as diBTC project as a key element and more meaningful relaversify the economy and avoid
in the diversification of oil tionship with Azerbaijan,”
the Dutch syndrome.
flows. Just as important is in- says Mr. Escudero.
Back on Washington’s
radar screen
RESTORING PEACE
A two-stage solution for Nagorno-Karabakh
THE territorial conflict with Armenia first began in 1988, when ethnic Armenians demonstrated against
Azeri rule in the district of NagornoKarabakh, and the downfall of the Soviet Union in 1991 magnified the
conflict into all-out war.
From 1992-1994, more than 30,000
people died in Nagorno-Karabakh. In
1993, the U.N. Security Council called
for a cessation of hostilities and the deployment of a peacekeeping force.
Relative peace became a reality when
Russia brokered a ceasefire in May
1994. Since the early 1990s, the Minsk Group of the Organization for Security and Cooperation in Europe
(OSCE) has led negotiations to bro-
ker a long-term solution.
What is certain is that political will
is crucial, according to President Ilham
Aliyev. “The conflict’s resolution envisages a two-stage solution. The first
stage includes eight to ten components, including the withdrawal of Armenian forces from the occupied
territories, de-mining, the return of in-
ternally displaced persons, security
guarantees and the restoration of infrastructure,” says Elmar Mammadyarov, the Azeri Minister of Foreign
Affairs. In a second stage, the demographic composition of the district
would be restored. Mr. Mammadyarov
then proposes the highest degree of
autonomy for Nagorno-Karabakh.
AREA:
33,436 square miles
POPULATION:
7.96 million
(July 2006 est.)
LANGUAGES:
Azerbaijani 89%, Russian
3%, Armenian 2%,
other 6%
INDUSTRIES:
Petroleum and natural gas,
petroleum products,
oilfield equipment, steel,
iron ore, cement,
petrochemicals, textiles
CURRENCY:
Azerbaijani Manat (AZM)
GDP purchasing
power parity:
$58.1 billion (2006 est.)
GDP real growth rate:
32.5% (2006 est.)
GDP per capita (PPP):
$7,300 (2006 est.)
EXPORTS:
$12.51 billion f.o.b.
(2006 est.)
EXPORT PARTNERS:
Italy, France, Russia,
Turkey, Terkmenistan,
Georgia, Israel, Croatia
Source: CIA World Factbook
UNITED WORLD
TEAM IN
AZERBAIJAN
Project Management:
Marie Leclercq
Editorial Director:
Louis de Fouchier
Project and Editorial
Assistant:
Yanu Pederiva
A more extensive version
of this report is
available at
www.unitedworld-usa.com
Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content
9/2/07
16:46
Página 2
Our World
Distributed by USA TODAY
Wednesday, February 28, 2007
2
IN BRIEF
Exports to grow
by 128 percent
ACCORDING to Socar’s
Marketing and Economic Operations Department, Azerbaijan’s state oil company
exported two million tons of
oil products between January
and July 2006. While the
amount was equivalent to the
previous year, prices per ton
of gasoline had risen by $46
to $754.75. In terms of gross
exports, the share of diesel oil
was largest with 904,526 tons,
followed by Mazut with
715,661 tons and gasoline
products with 170,410 tons.
From 2006-2009, oil exports
are projected to grow by an average of 128 percent.
Set up in 1992, Socar is the state oil company in charge of managing all the oil sector. It is Azerbaijan’s number one taxpayer and its largest employer with a staff of 62,000.
sortium known as the Azerbaijan International Operating
Company (AIOC), with 11 different partners. AIOC is responsible for 70 percent of oil
exports, mainly drawn from the
Azeri-Chirag-Gunashli (ACG)
mega-structure.
In 1994, Azerbaijan signed
what has come to be known as
‘the contract of the century’ for
ACG. Worth $10 billion, the
deal was seen as a consolidation
As a result of this new capi- of power for the former presitalization of resources, Azer- dent, Heydar Aliyev. It also put
baijan’s GDP grew up to $10.2 an end to the 60 percent GDP
billion in 2004. Foreign direct contraction that followed the
investment (FDI) rose 30 per- Soviet collapse in 1991. Socar,
cent to $4.4 billion that year as established in 1992 from the
major projects went on-stream. merger of the two state oil comAccording to the U.S. Depart- panies, is largely responsible for
Azeri light crude’s
ment of Energy
By 2010
comeback. The com(DoE), the effective
economists
pany is the largest
management of the
estimate the taxpayer in AzerbaiBTC coupled with
Azerbaijan’s hydroregion will be jan and its largest emcarbon wealth guar- producing up to ployer, with 62,000
employees. With the
antees
future
4.7 million
BTC pipeline, Socar
economic growth.
The State Oil Fund, barrels per day faces a new age of
created by former president Hey- capital investment in its offshore
dar Aliyev in 1999, might soon sector. By 2010, economists esbe worth $30 billion. The DoE timate the region will produce
estimates proven crude oil re- 3-4.7 million barrels per day
serves in Azerbaijan between 7 (mbd), exceeding annual proand 13 billion barrels. The in- duction in Venezuela.
Long-run economics, howcrease in production since 1997
is due to an international con- ever, tip the balance in favor of
Oil and gas
The great Azeri light crude
makes a comeback
As the region gains
increasing weight as
the new oil province,
Azerbaijan works to
become a paradigm
for regional energy
cooperation
FOR OILMEN, the word Balakhani has a mythical ring. Oilfields like Balakhani set off the
Great Game in the mid-19th century, and Azerbaijan suddenly
became the center of a global
rush for petroleum resources. It
involved derrick technology,
geo-political intrigues and prodigious amounts of money. In
1873, the Nobel family invested in oil development projects,
followed by the Rothschilds in
1885. Azerbaijan was producing
11.5 million tons of oil per year
by 1901, the bulk of world demand. It was the beginning for
Azeri light crude, a low-sulfur
premium quality crude oil .
In Baku, city architecture
along Neftchiler Avenue still
bears witness to the early age
of exploration and production.
Today, it is home to Socar, the
State Oil Company of the Azerbaijan Republic. In a replay of
events, the Baku-Tbilisi-Ceyhan (BTC) pipeline has repositioned the country on the global
energy map. Multinationals
have joined Socar at several
(PSAs) in the Caspian offshore.
The deepwater fields were left
relatively untouched by Soviet
geologists. This means the region qualifies as a new oil
province, with reserves comparable in size to those of the
North Sea.
INTERVIEW
natural gas. Proven gas reserves
in the Caspian are estimated at
232 trillion cubic feet (Tcf),
which compare to those of Saudi Arabia. With the global
switchover at electricity generating plants from coal to natural gas, this treasure trove means
Socar will be competing with
Russia’s Gazprom, which has a
stranglehold on the western European market. An export
pipeline will soon transport
Caspian natural gas west via
Erzurum in Turkey. No longer
landlocked, Azerbaijan is a paradigm for regional energy cooperation.
“The environment is one of
the top government priorities.
The oil industry has been our
main economic agent for 150
years. Now we are paying the
price for the careless approach,”
says Huseyngulu Bagirov, Minister of Ecology and Natural Resources. In 2003, Azerbaijan was
one of the first oil-producing nations to sign the Extractive Industries Transparency Initiative
(EITI). Socar has set up its own
environmental department and
works together with NGOs to
apply strict directives at offshore
PSAs. Together with the World
Bank, it is also taking part in a
$20 million scheme to clean up
damaged sites.
High prices boost
State Oil Fund
WORLD crude prices skyrocketed last summer during
the war in Lebanon. Socar
transferred the additional revenue from sales of Azeri light
crude to the government budget and the State Oil Fund. As
a result, Azerbaijan’s oil fund
revised its capital stock upward
to $1.5-2 billion. The head of
Azerbaijan’s Price, Economic
and Financial Department, Oktai Hagverdiyev, had previously forecast overall stock to
remain stable at $1 billion.
More gas from
Gobustan
A PIPELINE connection to
the fourth well of the Gobustan contract area, south of
Baku, will increase the
amount of natural gas delivered to Socar. Construction
of the pipeline link to the Duvanniy field was finalized
last summer. High pressure
at Duvanniy means special
equipment is needed to deliver gas. Currently, the three
other wells in Gobustan deliver an average of 40,000
cubic meters of gas per day.
The tapping of two more
wells means that Socar could
see a rise of 400,000 cubic
meters of gas per day.
BTC PIPELINE
‘Regional stability is vital to Joining the select club of
guarantee oil supplies’
global energy players
AZERBAIJAN’S state-owned
oil company is unlike any other
in the world. Its policies have a
great impact on economic planning, strategic partnerships and
regional stability. For Socar President Rovnag Abdullayev, the
challenge now is to guarantee
supplies to Western markets.
With the opening of the BTC
pipeline, 2006 has been a remarkable yearin Azerbaijan’s
history. Is this also the beginning of a new era for Socar?
Azerbaijan is the birthplace of
the world’s oil industry. Everything related to oil first happened
here. The first oil pipeline was
built here in 1901 from Baku to
Batumi in Georgia. The first oil
tanker to load crude was in the
Caspian Sea. Now, the most expensive and most sophisticated
pipeline in the world is the Baku
Tbilisi Ceyhan (BTC), covering
1,086 miles. BTC is very important for Socar not only because it transports oil crude from
the Caspian, but also because it
serves to diversify crude oil supplies. It’s an ideal transportation
solution for Western markets.
In what ways is BTC a new
model for energy cooperation
in the 21st century?
The well-balanced cooperation between international oil
companies (IOCs) and Azerbaijan is not new, it is an oil industry tradition. In terms of regional
cooperation, the Azeri and Kazakh governments signed an agreement to transport eastern Caspian
crude through Azerbaijan. If you
look at a geophysical map of
Eurasia, from the Barents Sea to
the Persian Gulf, the Meridian
crosses only three countries:
Azerbaijan, Iran and Russia. A
small strip of Azeri land can serve
as a transit corridor for oil and
gas.
The Caucasus region is often
perceived as unstable. What
role does Azerbaijan play in
anchoring regional stability?
The region is traditionally not
very stable, but the higher the
dependence of the world on
Caspian oil supplies, the higher the level of stability that needs
to be guaranteed. The sooner
we resolve the Azerbaijan-Armenia territorial conflict, the
sooner the resources to Europe,
the U.S. and Southeast Asia will
be guaranteed.
Azneft, Socar’s natural gas
subsidiary, wants to increase
its output. As of now, Azerbaijan is a net importerof gas.
What is the strategy in terms
of gas exports?
It’s true that we’re importing
natural gas from Russia,
Uzbekistan,
Turkmenistan and Kazakhstan. The gas is
imported via a
Gazprom pipeline and
total volume of imports this year will
be 4.5 billion cubic
meters. Our own
production is about
5 billion cubic meters per year. We’re
planning to build the
necessary infrastructure
to substantially expand
that volume. In its second
stage, the Shah Deniz field
will allow us to export gas
through Georgia and Turkey to
Greece, Italy and beyond.
How would you define your
commitment to environmental protection in the Caspian?
That’s a very serious issue.
During Soviet times, and especially in WWII, nobody thought
in terms of environmental protection. Moscow just demanded
that we produce more crude.
Now, of course, we demand that
all IOCs follow codified standards. We’ve created an environmental department within
Socar to clean up the Absheron
Peninsula, for example. And there
are strict environmental rules applied to production blocks in the
Caspian offshore.
Rovnag
Abdullayev
President of
Socar
At the height of last summer’s war in Lebanon, when
oil prices reached $80 per barrel, Azeri Light was pumped
commercially into the Turkish
port of Ceyhan for the first time.
Scarcely two months after its
official opening, the Baku-Tbilisi-Ceyhan (BTC) pipeline had
transported 12 million barrels
of Azeri crude from the Caspian Sea to the Mediterranean.
The State Oil Company of Azerbaijan (Socar) announced a
sales tender for its first load on
July 13: a total of 135,000 tons
scheduled to be shipped a month
later. Turkish media reported The BTC pipeline, which stretches a total length of 1,103 miles,
at the time that 11 million bar- covers more than 160 miles in Georgia and 650 miles in Turkey.
rels of crude had been loaded
onto 16 tankers at Ceyhan’s Hey- of global energy player. In the tance is even greater if one condar Aliyev terminal. The first to long run, BTC will help diver- siders it can meet 25 percent of
benefit from the sweet crude sify energy sources and damp- world demand growth.
“Our end target is to maximize
were countries like the Nether- en price speculation.
lands, Greece, India, France and
The BP-led pipeline has a to- the capacity of BTC. We will attal length of 1,103 miles. In Azer- tract all the oil in the region in
the U.K.
The ultimate beneficiary of baijan, it covers 248 miles, in order to export it via BTC,” Natik
the Minister
the BTC, however, is Azerbai- Georgia 161 miles
At full capacity Aliyev,
of Industry and Enerjan. Speaking at the inaugura- and in Turkey 668
tion ceremony in May 2006, miles. Most crude the pipeline will gy, said last summer.
Azeri officials hailed it as the originates in the Az- deliver one million The strategy is to test
the BTC for efficienoptimal answer for the Caspi- eri-Chirag-Gunashli
barrels per
an’s landlocked resources. Bot- (ACG) field east of day of crude to cy before withdrawing from other
tlenecks in the Bosporus and the Baku. Prospected in
Ceyhan, or
pipeline routes. KazaDardanelles Straits, loss of mar- the 1980s, ACG is a
1.3 percent of kh authorities have
ket value via the northern export joint project involvroute through Russia and the ing ten companies. global supplies signed an agreement
geo-political impossibility of According to BP sources, ACG to use the BTC as a conduit for
shipping crude through Iran fi- holds a staggering 15.3 billion five million tons of oil per year,
nally cleared the way for the $4 barrels of reserves with a geo- with a gradual increase to 38 milbillion BTC. Test filling began logical lifespan of 30 years. BTC lion tons. Mr. Aliyev therefore
in May 2005 and so far, export will generate $140 billion in rev- supports a continued use of the
volume has exceeded all fore- enue for Azerbaijan over 20 Baku-Novorossiysk pipeline, the
casts. Socar can now bring Az- years. At full capacity, the export route through Russia’s
eri Light to market on its own pipeline will deliver one million Transneft system. Likewise, the
terms and at world prices. Awider barrels per day of crude to Cey- Baku-Supsa pipeline to Georgia
implication of BTC is that it el- han, equivalent to 1.3 percent of will remain in operation because
evates Azerbaijan’s status to that global oil supplies. Its impor- of its low cost.
3
9/2/07
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Página 3
Our World
Economy
What happens after the oil boom?
Well aware that oil is a non-renewable
resource, Azerbaijan looks to diversify and
capitalize on its success by investing in IT,
telecoms and agricultural projects
SINCE 1996, Azerbaijan has
posted strong economic growth.
With liquidity in the banking system and a stable macroeconomic framework, policymakers are
looking to strike a balance between the oil and non-oil sectors.
They are fully aware of the challenge posed by Dutch disease as
only 1 percent of jobs created are
tied to the oil sector. Channeling
money into IT, manufacturing
plants, telecoms and agricultural projects is vital for long-term
sustainable growth.
“Today the economy rests on oil,
and oil is a non-renewable resource so sooner or later it will disappear,” says Heydar Babayev,
Minister of Economic Development. Thus far only Baku and the
Absheron Peninsula have benefited from the oil windfall, and
now is time to create jobs in rural areas too. Officially, there are
ten disfavored regions attempting
to climb out of poverty, seven of
which are mostly agricultural. A
State Program on Social and Economic Development of the Regions is helping to jumpstart new
businesses. In 2006, Mr. Babayev’s
ministry implemented hard infrastructure projects in the region
worth $450 million.
Developing physical infrastructure and co-financing SMEs
are two of the preferred formulas.
The state program has already led
to the creation of 5,500 enterprises, including 400 processing plants,
771 construction firms and 490
agricultural projects. Examples
include the Star LTD factory, producing television sets in
Shamakhy, and the Oka car assembly plant in Nakhicevan. The
objective is to channel oil money
and foreign investment to help
BUSINESS CLIMATE
SHAHMAR MOVSUMOV
Executive Director
Sofaz
transform Azerbaijan into a liberal market economy. By 2015, the
poverty level will drop by one-half.
With 76 percent of the economy in private hands, manufacturing and services are beginning to
play a more active role. The banking system compares favorably
with standards in south central Europe. “Just 15 years ago we didn’t even have a private sector. This
reflects real structural changes,”
says Deputy Minister of Economic
Development Mikayil Jabbarov.
Investing in transport infrastructure is also a priority for a
country that has always been a
junction between Europe and Asia.
The opening of the BTC pipeline
can help spin off other transit options. “Transportation brings trade
and since Baku is on the Caspian
Sea, our location will also attract
tourists,” says Mr. Jabbarov. “The
ANT INSHAAT
It pays to be transparent
To ensure long-term
growth, the
government is
working to
implement healthy
business rules and
above all, anticorruption laws
DESPITE the windfall from
oil revenues, the official poverty level in Azerbaijan at the end
of 2005 was 29 percent. That is
a hefty number for a country on
the brink of an economic boom.
Influence peddling, embezzlement and illegal decisions should
be exchanged for efficiency
gains. After all, foreign investors
look to allocate capital to markets with working regulatory
frameworks and good corporate
governance. It pays to be transparent.
Last July, the Commission to
Combat Corruption held a meeting in Baku to tackle shortcomings in the economy. Items on the
agenda included the privatization of state property, measures
to preserve natural resources in
the Caspian Sea, and steps to
fight the illegal loading of sand
from the country’s seashore. To
ensure transparency in the privatization of state assets, the authorities need to heighten
inter-ministerial cooperation.
The commission also pushed
through measures to restore illegally privatized state property.
At the meeting, President Ilham
Aliyev chaired a committee
tasked with addressing the environment in the Caspian Sea,
where there is no clear demarcation of borders.
The truth is that investment efficiency is a matter of business
climate. According to the Economist Intelligence Unit, the overall business climate in Azerbaijan
needs some glamour. The public and private sectors have much
MIKAYIL JABBAROV
Deputy Minister of Economic
Development
challenge is to transform oil revenue into human capital.”
The State Oil Fund of Azerbaijan (Sofaz), created in 1999, will
play a key role to manage efficiently oil revenues. Sofaz collects all oil income tied to
(PSAs) in the Caspian and allocates funds to support infrastructure, education, power plants and
logistics facilities.
“We have two main missions:
manage our assets to guarantee
macroeconomic stability, and manage our investments to diversify
the economy and generate employment for future generations.
We have to make the oil money
last forever,” says Shahmar Movsumov, Executive Director of Sofaz. The 31-year-old Harvard
graduate is conscious of the pivotal role Sofaz can play in investment policies and the day-to-day
economy: “Our reserves total $1.6
billion today and will reach $10
billion by 2008. Can you imagine
all that money going into a small
economy like ours?”.
SOURCE: WORLD BANK INVESTMENT CLIMATE SURVEY 2005
“Over the past period, imwork to do in order to broaden
the entrepreneurial environment. portant measures have been takPublic investment, via the State en to protect the rights and
Oil Fund (Sofaz), will benefit interests of investors, defend the
not from populist spending but poor, and establish equal conby making money allocations ditions for local and foreign businessmen. They should be able
transparent and participatory.
With its heavy reliance on the to use their profits in a free manenergy sector, Azerbaijan can set ner,” says Minister of Economan example in the region. It al- ic Development Heydar
ready has, arguably, by signing Babayev.
To diversify the economy and
the Extractive Industries Transensure sustainable
parency Initiative
Important steps long-term growth, Mr.
(EITI). But EITI
ethics need to extend have been taken Babayev is a champito protect the on of healthy business
into other productive
sectors of the econo- rights of investors rules. Legislation is
my: manufacturing, and establish an an obvious first step to
heavy industry and
open business dampen the temptation of officials. The
trade.
environment
state program to fight
Firms like Garadagh
Cement have taken important steps corruption recognizes there is a
to end corruption within its own problem. Amajor anti-corruption
distribution system. Its plant is law took effect in 2005. Implean emblem of Azerbaijan’s evo- mentation, however, is the ultilution toward Western prac- mate litmus test.
tices. Privatized in 1999 and
Since independence, inflows
sold to the Swiss-based Holcim of $20 billion have made AzerGroup, Garadagh Cement now baijan a magnet for FDI. With
complies with ISO 9001:2000 oilfields like Azeri-Chirag-Gucertification for quality man- nashli (ACG) going on-stream
agement. It sends employees in 2006, the country will be more
for training in Switzerland. highly scrutinized for corrupMost importantly, it has tion indices. If it passes the transchanged the rules for doing parency test, more money will
be forthcoming.
business.
Building on the Baku boom
NOWHERE is the nation’s tion company. It not only foconstruction boom more evi- cuses on the construction of resdent than in its capital, Baku. idential and public buildings,
Now one of the most dynamic but also has activities in interinon-oil sectors of the economy, or furnishings. The company
the surge in the construction in- has a successful furniture mandustry is visible throughout the ufacturing division that procity, where new buildings are duces both residential and office
springing up so fast and furious furniture, as well as interior
that the country’s cement sup- doors, windows and floors.
“We opened a furpliers can barely
‘Step by step, niture
factory a year
keep pace. Baku’s
we are
ago and we are now
transformation inbecoming a
to the administraworking on building
a cement factory to
tive and political
completely
manufacture our
heart of the Southintegrated
Caucasian region is
own cement. So step
company’
by step, we are bedrawing an influx
of immigrants not only from coming a completely integratother national regions, but also ed company,” states Ant Inshaat
from neighboring countries – a Director Azad Ibrahimov.
trend that is set to continue for
Projects to date carried out
by the company have included
another two years minimum.
Established in 2002, Ant In- four individual residential apartshaat Repair Building Ltd. is ment buildings as well as a large
Azerbaijan’s leading construc- residential complex consisting
Ant Inshaat currently has
more than twenty new
projects under way.
AZAD IBRAHIMOV
Director of Ant Inshaat
Repair Building Ltd
of seven ten-story buildings.
Today, Ant Inshaat has more
than twenty projects under way,
including two new residential
complexes and five residential
apartment buildings. It is also
contracted to construct a building for the Azerbaijan State Economic University.
ISO 9001 certified, Ant Inshaat places a high priority on
quality construction and continually looks at ways to improve its equipment, technology
and final product. “We pay very
close attention to the technology we use, and work with leading international companies to
have the best expertise on our
projects, such as our collaboration with Liebherr Export of
Germany on the purchase and
operation of our concrete production plant,” says the director.
“We would like to see more
American companies in Azerbaijan in order to further modernize the construction industry
and upgrade our standards, as
we are still seen as using
an old Soviet style,” comments Mr. Ibrahimov. “At
Ant Inshaat, it is very important for us to meet international standards. We
would definitely like to
collaborate more with
American companies.”
ANT Inshaat is one of the leading and fastest growing construction companies in Azerbaijan. Using the latest building technologies available and quality
certified to ISO 9001, we use the finest materials in creating elegant apartments and residences, as well as several civil projects, such as schools. Our high
standards in design not only cover the external aspect, stability and security of the building, but our design group also carries its meticulous attention to
detail through to the interior design, which is why we have become the partner of choice for international companies looking to do business in Azerbaijan.
ANT INSHAAT
AZ1000, 121 Yusif Vezirov Str., Baku Tel: +994 12 49314 71 [email protected] www.ant-inshaat.org
9/2/07
16:47
Página 4
Our World
AGRICULTURAL REFORM AND PRIVATIZATION
duction, a tradition in the region for
16 centuries, is a resurgent industry thanks to technological investments. With cotton production
steadily on the rise, farmers harvested over 196,000 tons of cotton in 2005.
Formed in 1997, MKT Istehsalat-Kommersiya is the largest
producer of raw cotton products in
Azerbaijan. As one of the first agricultural enterprises to welcome the
privatization process, the compa-
gy, so we need to apply modern
equipment, and predominantly
from America.” Since its establishment, MKT Istehsalat-Kommersiya has attracted over $4.6
million in investment.
As the Azerbaijani economy
grows and the banking industry
strengthens, financial institutions
are playing a key role in developing rural infrastructure and extending loans to agrarian
entrepreneurs. The International
Fund for Agriculture Development and the Ministry of Agriculture of Azerbaijan recently
inaugurated projects worth $25
million to improve irrigation and
increase lending to farmers. According to Minister Abbasov,
“These projects play a positive
role in the integration of our agriculture into the world economy,
introducing advanced technologies and expertise to Azerbaijani
villages and mountainous regions.
These projects gave an impetus to
agrarian policy carried out in republic, the formation of agrarian
market and capacity building.”
Mr. Koehler. The company is in
talks with the European Bank for
Reconstruction and Development
to secure funds.
So far, the Holcim Group has
devoted much of its attention to
environmental impact. In the
clinker and cement industry, Soviet-era processes were heavily
polluting. Garadagh Cement is
now working to comply with strict
EU directives. With the best laboratory in the CIS, the company
is ISO 14001:1996 certified. A
major step in the plant’s rehabilitation has also involved a battle
against inappropriate usage. “Before, people used the hardest cement for all applications. We now
invite engineers to training sessions to explain how to use the
right cement for the right application,” says Mr. Koehler.
The general director is excited
to be witnessing the country’s renaissance. The business environment and legal framework still
have room for improvement, but
Mr. Koehler has struck a new
path that is beginning to rub off
in other industries. He has done
away with 97 percent of the socalled distribution system that
placed the plant’s cement products in the market.
“That system was
dismantled thanks to
our local workers.
One of my professional dreams is to
empower local people,” he says.
Repositioning the company’s
products and a reduction of imports from Russia has produced
excellent results. But with a
construction boom north of the
border, officials at Garadagh
Cement think it is time for new
competitors, as the plant would
fare well in a sound competitive market. “Clearly, there’s
room for other cement producers in this country,” says
Mr. Koehler.
Agriculture is fast becoming a dynamic, market-oriented sector, with
cotton production thriving and infrastructure investment being sought
farm) system only allowed farmers to sow crops approved by the
authorities. In return, soil tillers received a fixed monthly income that
bore no relation to how much they
produced. Decades of ecological
mismanagement endangered the
species of sturgeon and other fish.
In its 15 years of independence,
Azerbaijan has overhauled this
outdated system. Since reforms
were launched in 1995, over three
million people have received 1.4
million hectares of land as private
property. Today, over 90 percent
of land is privately owned and the
state monopoly on agriculture has
been dismantled. Agricultural pro-
duction has increased steadily, and
in 2005, close to $284 million
worth of agricultural goods was
exported.
After the energy sector, agriculture is transforming into the most
dynamic, market-oriented sector
of the economy. “Our ministry and
the government are mobilizing all
resources to bring national standards, certificates and technical
terms of agricultural goods in line
with European and international
standards,” says Minister of Agriculture Ismet Abbasov.
Aside from Azerbaijan’s “black
gold,” cotton is proving to be “white
gold” for the economy. Cotton pro-
4
ny remains at the forefront of the
cotton industry, exporting 90 percent of its production to Russia,
Switzerland and the U.S. MKT is
firmly focused on raising Azerbaijan’s international agricultural
profile on the domestic and global marketplace.
However, insufficient rainfall
makes it a challenge to grow water-intensive crops such as cotton.
Technological investments and upgrades from western investors have
greatly restructured the supply
chain of MKT Istehsalat-Kommersiya. Since 2005, the U.S. company Valmont Industries has been
involved in the company’s progression. With its American partner, MKT introduced center pivot
mechanized irrigation that is not only economical but more ecologically friendly.
General Director Ikram Karimli understands the vitality of his
company’s cooperation with foreign partners, noting the impact
of U.S. investment for his enterprise. “America is a strong cotton
producer mainly of its technolo-
Ten years to convert
kolkhoz into businesses
AZERBAIJAN is a cradle of
agriculture. The land’s fertile soils
yield fresh and succulent melons,
pomegranates, persimmons and
other exotic fruits. Cash crops such
as cotton, tobacco and tea are cultivated along with grain – the staff
of life for millions. Black caviar,
a luxurious delicacy synonymous
with haute cuisine around the
world, is produced from sturgeon
stocks that thrive in the deep waters of the Caspian Sea.
During the Soviet era, Azerbaijan was indeed famous for this rich
and abundant bounty of agricultural
goods. Under Communist rule,
however, the kolkhoz (collective
IKRAM KARIMLI
General Director of
MKT Istehsalat-Kommersiya
GARADAGH CEMENT
Compounding
the growth
AS Aconstruction boom sweeps nology was obsolete. After a tranthrough Azerbaijan, the visual sitional period, things are movlandscape is morphing. The opening forward again. According to
ing of the BTC pipeline has ush- Uwe Koehler, the General Diered in a new architectural fever. rector since 2004, the Holcim
Locals speak of a Dubai-like trans- Group has invested $40 million
formation for Baku. Residential in modernizing the plant, $17
complexes and skyscrapers, how- million more than stipulated by
contract.
ever, are not the
only structures Locals refer to a Dubai- Garadagh Cevying for build- like transformation in ment now has caing materials. Baku, which has created pacity for 1.3
Large-scale enermillion tons per
a surge in demand
year, making it the
gy projects are also expanding at a breakneck pace industry leader in Azerbaijan. The
and require things such as cement. plant currently consists of four
Garadagh Cement was estab- kilns, nine cement mills and a
lished in the 1950s. The plant, staff of 553.
“Our plan for the future is to
near Sahil, saw productivity fall
in the early 1990s. By the time it switch from the obsolete wet
was privatized to the Swiss-based process to the dry process. EnerHolcim Group in 1999, the tech- gy consumption will go down by
UWE KOEHLER
General Director
Garadagh Cement
35 to 40 percent and will allow
us to stop importing clinker from
Russia, thus increasing our capacity by 15 percent,” says Mr.
Koehler. But even then, the company will not be able to meet domestic demand, which the general
director estimates at 2.5 million
tons annually. “That’s a huge gap
and it would require a further investment of $120 million,” says
In 2005, plant
revenue grew ten
percent, and in a
market renowned
for tight demand
and supply, prices
have increased.
Banking
The velocity of the manat
Banking services have already improved, and
will continue to do so as the central bank
works to create an enabling environment for
banks to further facilitate economic reforms
WITH 60 years of oil reserves
at a 2004 consumption rate, Azerbaijan has a lot of fuel. Given the
velocity of transactions, Azerbaijan’s currency—the manat—
is circulating fast. After years of
duress, the economy can finally cash in on oil exports, worker remittances and FDI. The
people can spend it on expensive
cars and mobile phones. In the
midst of this consumer boom,
financial intermediaries are posting gains. Liberalization has been
the byword since 1995. New
banking legislation passed in
2004-05 is based on Basel Core
Principles. Still, the transition
has yet to come full circle.
“The transformation of oil
wealth to economic development requires a banking system
based on international standards,” says Elman Rustamov,
Chairman of the National Bank
of Azerbaijan (NBA).
Established in 1992, the NBA
navigated the murky waters of
the post-Soviet collapse, as well
as the spillover from the Russian monetary crisis of 1998. The
country regained its footing in
the mid-1990s. In between, it
had to scrap the old manat and
introduce a new one. War had
caused the exchange rate to tumble in the early days of independence. “The new currency
has a beautiful design and people accept it with pleasure,” says
Mr. Rustamov.
Despite 15 years of continuous
work, the transition has to go
through another set of steps.
“We’re entering a new era. Our
main goal is to develop a strong,
diversified and competitive mar-
ket economy by using the oil income optimally,” says Mr. Rustamov. The NBA is focusing on
targeting inflation and bank consolidation. After all, a takeoff of
the non-oil sector will not happen unless inflation is low, and
it has surpassed 3 percent in the
last ten years.
NBAofficials have raised minimum capital requirements for
ELMAN RUSTAMOV
Chairman of the National Bank
of Azerbaijan
banks from $5 million to $10
million, yet few have been able
to meet the new conditions.
Where there used to be 240
banks, there are now 42. Mr.
Rustamov thinks that they may
still be too large a number for a
population of eight million. The
total authorized capital of the 42
existing banks, minus the stateowned institutions, reached $223
million at end-2005. Ideally, Mr.
Rustamov would like to see a series of mergers between small
and medium banks with the help
of foreign financial institutions.
There are two state-owned
banks in Azerbaijan that control
almost 50 percent of the market:
Kapital Bank and International
Bank of Azerbaijan (IBA). IBA
is responsible for 75 percent of
banking operations, while Kapital Bank still holds the frozen
individual deposits of Soviet
days. Both institutions are slated for privatization. To prepare
for their future sell-offs, they
have spearheaded several reforms: issuing credit cards, expanding their ATM reach and
introducing friendlier service.
Meanwhile, Azeri retail banks
are aggressively courting the
customer. The number of branch
offices has exploded, even in the
provinces where people proverbially stash their money under
their mattresses.
In 2006, banks began to offer
long-term mortgage at a discount
rate of 12 percent. Compared to
the market interest rate of 24 percent, it is a steal. Banking services
have also improved, with more
Azeris than ever before wielding
a credit card. At supermarkets
and shopping malls, the ATM is
now part of everyday life. The
priority is to create an enabling
environment for retail and commercial banks that facilitates further economic reforms.
Major foreign players in the retail sector would be a boon for
competition. The spike in consumer loans and the growth in
deposits are luring banks from
central Europe with experience
in emerging markets.
With an appreciating currency, saving in manats is in fashion. But with bank deposits at 15
percent of GDP, there is still a
long road ahead. “We’re aware
of the risks we face and are familiar with the experience of
other countries. We intend to follow best practices,” says Mr.
Rustamov.
9/2/07
16:44
Página 5
9/2/07
16:44
Página 6
Our World
INTERNATIONAL BANK OF AZERBAIJAN
6
INTERVIEW
IBA’s challenging role
in the new banking era
‘We understand the need to
develop alternate sectors’
JAHANGIR HAJIYEV is
Chairman of the Board at IBA,
the largest financial institution in Azerbaijan. As the official intermediary for the oil
and gas sector, IBA is expected to grow exponentially
in the medium-term.
factory now employs 1,800 people. Other IBAprograms are jumpstarting tobacco plantations,
juice-processing plants, car-makers and SMEs in the food-processing sector.
In international financial markets, the bank’s solid reputation has
allowed it to sign syndicated credit agreements with Commerzbank
and Citibank, valued at $56 million. It has obtained credits worth
€45 million ($59.15 million) from
Société Générale, as well as a $102
million credit from Barclays PLC.
Foreign participation in IBA activities has also prompted partnerships with Bayerische
IBA its title of Best Bank in Cen- Landesbank, Credit Suisse, the
tral and Eastern Europe this year. Sumitomo Mitsui Banking CorIn March, Global Finance cited poration and BNP Paribas.
it as the most rapidly developing Through these institutions, Azeri
SMEs are able to obtain credit
bank in Asia.
At IBA, confidence is high. Ro- lines for factory equipment at relbust indicators have led to im- atively low interest rates.
From 2000 to 2005, foreign trade
provements in customer service
and a repositioning in the market. turnover in Azerbaijan rose threeThe bank has become a group of fold to $8.5 billion. The governcompanies, with subis spearheading
‘Development of ment
investments in infrasidiaries in sectors
the non-oil
structure, such as the
such as insurance and
sector has
road network, that will
leasing. Mr. Hajiyev
wants to use IBA’s become the top facilitate trade in the renew versatility to inpriority of the gions. With the BTC
pipeline, the country
vest in the non-oil secAzeri
regained its historic
tor’s productive
government’ has
potential. Project firole as a transportation
nance is going to value-creating conduit between East and West.Acsectors like the cotton industry, cording to Mr. Hajiyev, revenue
where IBA-financed ginning tech- from the BTC will significantly
nology has doubled output and increase electricity production in
created 1,500 new jobs. Through rural areas, as well as other basic
the U.S.-based Eximbank, it has infrastructure. Soft infrastructure
linked Azeri agribusiness with the is equally critical. “We have risen
Valmont Industries and John to the challenge to ensure our huDeere. IBAschemes have even re- man capital also meets the revived the ancient Azeri craft of quirements of Azerbaijan’s
silk production, an eminently ex- integration into the global econoport-oriented industry. Arestored my,” says Mr. Hajiyev.
In the first five years of this century, foreign
trade turnover in Azerbaijan tripled to $8.5
billion, prompting huge re-investments in
infrastructure and regional trade links
WITH the opening of the BTC
pipeline, Azerbaijan is fêting a
new era of prosperity. But for Jahangir Hajiyev, Chairman of the
Board at the International Bank of
Azerbaijan (IBA), paying honor
to the country’s economic takeoff
is more like a wake-up call. At an
investment conference sponsored
by the U.S.-Azerbaijan Chamber
of Commerce (USACC) in Washington last April, the IBA Chairman explained the importance of
weaning the economy off the oil
sector. There is homework for all
economic agents—banks first and
foremost.
“Development of the non-oil
sector has become the top priority of the Azeri government. It is
a formidable challenge,” Mr. Hajiyev told the USACC audience.
For IBA, the largest bank in the
southern Caucasus region, it means
implementing new technology,
improving management practices
and making headway in global finance. The bank has offices in
London, Frankfurt and Moscow.
It plans to penetrate the dynamic
Georgian and Turkish markets
next. With more than 50 percent
of the market share in domestic
banking and $1.5 billion in assets,
IBA is preparing for the injection
of petrodollars.
Growing demand for capital
goods and higher disposable incomes are ushering in a new banking era. In 2005, net profits
increased by 25 percent and bank
assets were up 34.5 percent. Fixed
deposits grew 16 percent and IBA’s
credit portfolio closed the year
with a gain of 63 percent. The
bank has opened 25 new regional branches in the last year alone.
ATMs with the IBA logo now
number about 500.
IBAhas also maintained its leadership in terms of total credit to
the national economy, as it did
with its own plastic card business.
At end of 2005, the total number
of Azericard holders was 650,000.
Euromoney magazine awarded
IBA is the largest bank in
Azerbaijan. How would you
describe the institution?
IBA is a quasi state-owned
bank, with 50.2 percent of
shares in hands of the Ministry
of Finance. It is not only the
largest financial institution in
Azerbaijan, but also in the
southern Caucasus region. We
are a well-diversified group.
We have an insurance company that is the largest in the
region. We have a credit card
company, which is a member
of Visa and MasterCard. We
own the largest leasing company in the country—AzeriLeasing—and are selling 51
percent of its shares to UK investors. We have representative offices in London,
Frankfurt and are fully operative in Moscow.
How do you assess the sector’s potential?
Six years ago we had more
than 200 banks. Now the sector comprises about 40. But
we are still under-capitalized,
even at IBA. We have $1.5
billion in assets. According to
international accounting standards, we only have $100 million in shareholder equity. Our
goal is to double our capitalization in successive years. I
think Azerbaijan needs no
more than 10 to 15 banks, but
with high capitalization.
From its headquarters in Baku, IBA is expanding regionally and globally.
‘Cotton
production
has doubled
thanks to
IBA
investments,’
says
Jahangir
Hajiyev,
Chairman
of the
Board at
IBA.
Where does the bank’s comOur credit portfolio is very
mitment to excellence fit in diversified. We finance about
your strategy?
30-40 percent of the oil secIn the last two years, we’ve tor. The rest goes to agriculbeen awarded quality awards ture, construction and
by Citibank. Last summer, Cit- processing plants of all kinds.
igroup celebrated its 15th an- Diversification of our loan
niversary at a dinner in Baku. portfolio is one of our main
In my speech, I
goals. We aim to fiIBA finances
said we were celenance and develop
brating 13 years of 30-40 percent the non-oil sector,
cooperation be- of the oil sector; which is crucial for
tween our banks. the rest goes to Azerbaijan. We unOur work together
derstand that oil
agriculture,
goes back to 1993 construction and prosperity will not
when we first unforever and we
processing plants last
dertook clearance
need to develop aloperations through Citibank. ternate sectors.
Today, the volume of transactions is worth more than What growth opportunities
$1.2 billion. Citibank has al- have you identified for the
so arranged the last syndicat- IBA?
ed loan to IBA, valued at $56
Developing the non-oil secmillion.
tor is our main goal. During
Soviet times, Azerbaijan was
Your shareholders are said a predominantly agricultural
to be looking for private country and even today 50
partners. What is the status percent of the population lives
of privatization?
in rural areas. That is why we
Since 1997, we have had decided to invest in agribusitwo presidential decrees on ness. We also have silk and
IBA’s privatization. The gov- cotton processing plants. Coternment negotiated with the ton production has doubled
European Bank for Recon- thanks to IBA investments.
struction and Development
(EBRD) to sell 20 percent of You also have an ambitious
shares. But the bid was un- plan to open offices in
successful because the EBRD Turkey, Luxembourg and
strategic plan was sub-opti- Dubai. What can you say
mal. That prompted a third about IBA’s expansion
presidential decree in March strategy?
2005 outlining a new privatiThe oil revenue that Azerzation strategy for IBA and baijan is about to earn is goKapital Bank, the second- ing to boost the economy,
largest institution. A special especially the non-oil sector.
commission will hire finan- In 2001 we began operating
cial consultants to make offers abroad. Our credit portfolio
to potential investors. The in Russia has grown to $100
EBRD will be able to partic- million. Russia is one of our
ipate in this new tender.
main targets because of its
huge market. But we have
What role do you play in the had good experiences in
country’s economic devel- Georgia too, with mutually
beneficial projects.
opment?
SOCIO-CULTURAL INVOLVEMENT
RANKING
Supporting the next generation of artistes
IBA’s social and environmental responsibility
encompasses the arts and cultural heritage of the
country, attracting international stars to Baku
Bilateral artistic relations with Spain are fomenting the next
generation of Azeri performers and illuminating Baku’s arts circle.
THE INCREASE in capital
stock, derived from oil export earnings, is rolling the Azeri banking
system. According to macroeconomic theory, any increase in capital will result in an increase of
output. Only this time, the marginal product of capital also includes soprano evenings, art
exhibits and film festivals. If so,
what is the price of an evening with
opera singer Montserrat Caballé?
As it turns out, an evening with
the prima donna of opera is priceless. The Catalan soprano gave a
memorable concert in Baku last
year, accompanied by the Azerbaijan State Symphony Orchestra.
At the Baku Music Academy, Caballé was available for a master
class with local vocalists, the most
talented of whom will participate
in a competition in Spain, an example of how IBA extends its allocation of capital to include
allocation of talent.
“A necessary condition to harmoniously develop business is to
keep and improve the social, cul-
tural and natural environment. Caring for the above is not just formal
business, but the call of our hearts.
We are trying to revive the best traditions of Azerbaijan’s charity,”
says Chairman of the Board Jahangir Hajiyev in IBA’s 2005 Annual Report. The largest domestic
bank hopes that its arts patronage
will pay off in the future by inspiring a younger generation.
In February 2006, Baku was
the first venue to host the 100th
anniversary
of
Dmitry
Shostakovich with a series of
concerts. The 20th century composer was fêted in the Azeri capital with six days of continuous
concerts directed by Mstislav
Rastropovitch. Guests of honor
included Russia’s own Galina
Vishevskaya and Ukraine’s Oxana Dika.
Baku has a vibrant
and internationally
renowned
performing
arts scene.
The ten
principal
banks in
Azerbaijan
International
Bank of
Azerbaijan
AB Standard
Bank
Unibank
Kapital Bank
Bank of Baku
Bank Respublika
Azerigasbank
Texnikabank
Azerdemiryol
Bank
Kocbank
7
9/2/07
16:45
Página 7
Our World
INTERVIEW
‘Attracting money
from abroad is
our priority’
AB Standard’s blueprint for continued success is based on diversity. The bank holds interests in a broad sphere of non-oil sector industries.
AB STANDARD GROUP
Leader of private banking
aggregate capital of the bank is
approaching $18.9 million. Profit in the first three quarters of
2005 rose to $3.8 million.
“By Azeri standards, our bank is
large. But in terms of internaproducts. Modern in outlook, tional banking, we are still a small
he embodies a new generation player. We want to become a
of Azeri financiers. An innova- medium-sized bank with good
tive thrust can go a long way in ratings over the next ten years,”
establishing credibility, after all. says Mr. Babayev. Bank Stan“I think image is critical. We’re dard finances large-scale projects
trying to build our corporate im- at competitive rates in 12 different regions of Azerage based on quality, stability and ‘I believe image baijan. Sixty-seven
openness,” says Mr. is critical. We’re projects in sectors like
construction and
Babayev.
building our
Key indicators at corporate image telecommunications
could spark interest
Bank Standard speak
of breakneck growth. based on quality, among foreign instability and vestors. For Mr.
In 2005, the total volopenness’
Babayev, the bank’s
ume of assets exdynamic growth will
ceeded $100 million,
representing an increase of 31 remain closely related to the counpercent. The landmark number try’s overall performance. As it
was hailed as the breaking of a absorbs hard cash from the oil
psychological barrier for the coun- sector, it may only be a matter of
try’s private banking sector. By time before people feel confident
end-2006, the figure had more enough to take the money from
than doubled to approach $250 under the pillowcase.
million. Meanwhile, the bank’s The core activities of AB Stancredit portfolio had grown to $50 dard Group are banking and inmillion by December of last year surance. But beyond its financial
and its customer base was up by bloc of insurance and brokerage
39 percent year-on-year. Now the firms, there are ten other sub-
AB Standard Group leads the way in
Azerbaijan’s financial sector. With assets of
Bank Standard increasing 31 percent in 2005,
the group is now focusing on global expansion
When Bank Standard opened its
new headquarters in Baku at no.
4, Hajiyev Street, many people
took notice. After all, the bank
plays a special role in Azerbaijan’s financial sector. Its Western practices and innovative
approach are patent at its branch
offices. Even its subtle annual
report speaks of sophistication.
As the leading private bank in the
country, Bank Standard is a trendsetter contributing to national development. It is known for the
efficiency of its branch network.
So then why do 90 percent of
Azeris still prefer to hoard their
savings at home?
Mostly, it is a matter of trust.
Emin Babayev wants to change
all that by selling financial
know-how. As Vice-President
of AB Standard Group, he feels
the responsibility to educate people. Babayev is committed to
classical banking products, such
as loans and project finance. But
he thinks the future hinges on
introducing non-traditional
sidiaries in different sectors. The
group has ambitious plans in the
non-oil sector to ensure future
growth. There is a brick manufacturing plant and a fish cannery
in Siyazan. At Darnagul Boru, it
runs a polyethylene plant that
produces polymer pipes for industry. Located outside of Baku,
the plant supplies components
for power lines, heating systems
and gas transportation. Agribusiness is its third tier of activities.
AB Pro, a subsidiary, has several locations for vegetable canneries, juice processing plants
and tea plantations.
“We’re also in the travel business.
AB Travel, in Baku, is a member of a global network geared
toward business travelers,” says
Babayev. The travel agency is a
member of IATA and has agreements with major airlines: Turkish Airways, British Airways and
Lufthansa. One of its missions is
to develop Azerbaijan’s longterm potential as a tourist destination. In the southern town of
Lankaran, for example, AB Standard operates the four-star Qala
Hotel. Surrounded by wild mountain rivers and waterfalls near
the Caspian Sea, a visit to
Lankaran is a true Azeri delight.
EMIN BABAYEV heads
Azerbaijan’s largest private financial group, AB Standard.
Founded ten years ago, its image is based on Western standards of quality. “We offer a
new way of banking,” says Mr.
Babayev.
What are your core activities?
Our priorities are retail banking and insurance. All of our
companies are important, but
we have invested largely in the
financial sector. We want to
be leaders in this market. The
economy of Azerbaijan is
growing and, as a result, so is
the financial system.
How do you see AB Standard Group from the inside?
We started out in 1996 as a
branch of Russia’s MostBank,
one of the leaders at the time.
A couple of years later, local
investors bought all equity
shares and in 2004 we rebranded the company and renamed it Bank Standard. We
are the leading private bank in
EMIN BABAYEV
Vice-President
AB Standard Group
the country, almost twice as
large as our competitors.
What are the key drivers behind the growth in net profits?
There was a change in management in 2004. Additionally, we’ve been very active in
the media. In the future, we
want to achieve the best standards of service for our customers. We’re trying to educate
people and convince them to
trust their bank. The potential
is huge.
How is Bank Standard different from other retail
banks?
We always try to produce
something new: banking products, credit cards, loans. We
have the largest loan portfolio
in the country, especially in
the automobile sector. We were
also the first to offer housing
mortgages. We provide every
single customer with excellent
service. We’re doing the right
thing at the right time.
Are you considering strategic partnerships with foreign
banks?
We’re looking for foreign
investors in certain areas. Bank
Standard has created an investment fund and so far it has
drawn the attention of UKbased investors. They are interested in investing in
construction, property and
agriculture. We have a lot of
good projects in Azerbaijan—
but we don’t want to finance
them all. Attracting money
from abroad is a priority because it’s cheaper.
KAPITAL BANK
Azerbaijan’s answer to Citibank
Founded in 1874 as the United Universal JointStock Bank, a 2000 merger with three stateowned banks led to the creation, in 2005, of
Kapital Bank - a forward thinking institution
A presidential decree in 2005 has opened the door for privatization.
“KAPITALBANK wants to be
the Citibank of Azerbaijan,” says
Rauf Rzayev, Chairman of the
Board. After signing a contract
with the I-FLEX Group in 2006,
to which Citibank is also a party,
Kapital Bank is widening the range
of its products. For fast cash money transfers, its customers will soon
be able to use their mobile phones.
“I don’t think it will be active in
the next two years, but I do know
we will be the first in the market
to offer these services,” says Mr.
Rzayev. Such forward-looking positions are new in Azerbaijan.
Appointed Chairman in 2004,
Mr. Rzayev initially faced the
daunting task of transforming the
bank’s ethos. Founded in 1874,
the institution was known for 131
years as the United Universal JointStock Bank, or BUS Bank. In
2000, the merger with three other state-owned banks allowed it to
inherit the healthiest assets in Azerbaijan’s banking sector. Re-branded as Kapital Bank in January
2005, it is still fully state-owned
by the Ministry of Finance. But
as of March 2005, a presidential
decree marked the beginning of a
privatization process that will reduce state ownership by 50 percent.
Mr. Rzayev qualifies the current situation at Kapital Bank as a
re-engineering operation. The rankand-file economist that he is, Mr.
Rzayev is responsible for top-down
modernization. His ambition is to
eventually control the open market and become number one in the
country’s banking scene. So far, he
has undertaken an internal restructuring of the organization and
instituted 52 new procedures to
improve corporate governance.
Effective risk management is also a top priority. The network,
meanwhile, has been widened to
include 89 branches and 97 cashdesk offices. All of these factors
have strengthened its profile among
international financial institutions.
“We went through an audit
process this year and the bank was
priced at $60 million. Compared
to 2004, we have grown tenfold,”
says Mr. Rzayev. The auditor,
PriceWaterhouseCoopers, assessed the bank’s income, cashflows and changes in shareholder
equity. It found that the bank renders a full range of banking services: deposits, loans, currency
conversion, currency transfers,
safe deposit boxes, cash transfers,
sale of credit cards and brokerage
services at the Baku Stock Exchange. It has correspondent relations with a number of
international banks, including
Citibank, American Express,
Commerzbank and HSBC.
The success of Mr. Rzayev’s
re-engineering process was first reflected in the bank’s 2004 financial results. Income had grown
2.5 times year-on-year. Revenue
was up 17.6 percent and assets
had grown 58.9 percent. In terms
of capital, it had grown 43.8 percent over the previous year.
Azerbaijan pays special attention
to its relationship with the U.S., a
major energy and infrastructure
partner. As the domestic economy
develops, the transfer of knowhow from the U.S. banking system will prove decisive. At Kapital
Bank, all the ATMs are currently
sourced in the U.S. Since 2000, it
has also become the leader in express money transfers via Western
Union. As an open market with a
Western development style, Mr.
Rzayev thinks the relationship will
deepen in the future. “Abank works
in the direction that customers want
it to work,” he says.
With centuries of experience in the production of high
quality cotton, Azerbaijan has long been an important
exporter of raw goods. Using the latest technologies
and applying its vast agrarian knowledge, MKT is the
market leader in the cotton industry. An Associate
member of the Liverpool Cotton Association since
2003, MKT enjoys an excellent worldwide reputation
for the quality of its goods and service. As well as
export activities, MKT works to promote the Azerbaijani
agriculture industry and reinvests heavily in the sector.
w w w. m k t c o t t o n . c o m
9/2/07
16:45
Página 8
Our World
8
Telecoms & IT
PHOTO: MKT COTTON
‘Government policy has
made ICT the priority sector’
Since 1997, AG Bank has pioneered the involvement of financial institutions in agro-industry projects.
AZERIGAZBANK (AG BANK)
The pick of the crop
Azerigazbank was established in 1992 as a
public-private venture. With only 0.09 percent
of shares publicly owned, AG Bank is today a
streamlined and innovative financial house
Knowledge is sometimes more
valuable than a credit line. For
Chingiz Asadullayev, Chairman
of the Board at Azerigazbank
(AG Bank), that could sum up the
assets of a private Azeri bank. If
it offers a comparative advantage, knowledge is part of a bank’s
capital stock.
AG Bank was established in
1992, with an initial 49 percent
stake in the hands of state-owned
Azerigaz, the natural gas company. The remaining 51 percent
of shares was left in the hands of
private individuals and companies in the natural gas industry.
When the bank ran into accounting problems in 1994, the
majority of stakes were sold off.
Today, only 0.09 percent of equity capital remains in the hands
of Azerigaz. “We suffered from
the reputation of being public.
Now we are more flexible and efficient,” says Mr. Asadullayev.
As the International Finance
Corporation (IFC) and the
Asian Development Bank prepare to disembark in Azerbaijan, they are considering a 37
percent equity stake in AG
Bank. After all, the economic
outlook is robust and the boom
has only just begun. It is also
a golden opportunity for AG
Bank to pick up new management skills and strengthen risk
procedures. “Foreign banks
want to come and buy. But they
are also looking to develop
CHINGIZ ASADULLAYEV
Chairman of the Board
Azerigazbank
banks institutionally. One needs
to learn, learn and learn again,”
says Mr. Asadullayev.
If the banking industry is the
mirror of the economy, AG Bank
indicators could not be rosier.
From 2002-2003, the bank grew
fourfold. As of September 2005,
total assets amounted to $57 million and equity had risen to $7.5
million. Net revenue grew from
$0.943 million in 2004 to $1.34
million a year later. The capital
adequacy ratio (CAR) of 10 percent stipulated by the central
bank was well above the minimum by September 2005, at 15.4
percent. Overall, AG Bank is
ranked second in Azerbaijan’s
private sector and fifth in terms
of its loan portfolio.
Last September, the bank announced it had completely used
two credit lines of the European
Bank for Reconstruction and Development (EBRD), which totaled $3.5 million. A further
co-financing agreement is to be
signed with the EBRD to back
large-scale projects in the future.
In addition to its headquarters in Baku, AG Bank operates
eight branches in the country.
“In five years I’d like to see
AG Bank in a joint partnership
with an international financial
institution. Our strategy is to be
among the most advanced
banks in the country. Certainly, we want to achieve the leading position in some areas,”
AG Bank follows a strategy
of growing alongside its customers. By instituting good governance principles, it hopes to
attract the attention of more corporations, like Improtex. Initially a travel agency, Improtex
later branched out into tourism
and automobiles. Today, it has
grown into one of Azerbaijan’s
largest holdings. Mr. Asadullayev wants to use his skills in
financial intermediation to educate clients about maximizing
their potential.
Mr. Asadullayev is interested in partners that can transfer
know-how. Azerbaijan may
have prodigious oil and gas reserves but resources will not
be properly allocated without
investing in education and training. “I would like foreign investors to come here, establish
businesses and teach people
how to manufacture products
that say ‘made in Azerbaijan’,”
is no developed system of ICT
production in Central Asia. Secondly, skilful human resources are
vital in the ICT sector. Traditionally we have good human resources and we also understand
that this can always be improved.
market leader, to private compa- Thirdly, Azerbaijan enjoys a posnies.
itive international reputation following successful oil and gas
What steps have been taken by projects that attracted foreign inyour ministry to build an investors in the country. Finally, the
formation society so far?
government in Azerbaijan underThe Ministry of Communica- stands that attractive conditions
tions and Information Technolo- for foreign investment must be
gies is in charge of building an created and guarantees have to be
information society in Azerbai- given to foreigners.
jan. The ministry has two main diWe have several points in our
rections: to intensively utilize ICT Special Economic Zones plan. The
for socio-economic
first is the production
‘About 40
development, and for
and export of ICTprodthe civilian develop- percent of the ucts, and the second is
ICT market is the establishment of a
ment of society. In the
socio-economic
dominated by technopark. Thirdly, we
sphere we continue to
are working to increase
U.S.
create Special Ecomultinational Azerbaijani telecomnomic Zones and inmunications infrastruccompanies’
crease the attraction
ture, and the fourth is to
of foreign investment. In the civil- create a transitional content data
ian sphere we play a democratiz- center.
ing role for our society.
Your ministry signed an agreeWhat do you think are the main ment with the UNDP to develassets Azerbaijan can capitalize op internet access in the regions.
on, in order to position itself as Could you describe the cooperan ICT hub in the region?
ation between yourministry and
Firstly, there is a delay in ICT
production in the region and there
Continued on page 9
Minister of Communications and IT Ali
Abbasov explains the objectives and
achievements of his ministry, and its plans to
auction off its 37.5 percent share of Azercell
ACCORDING to President Ilham Aliyev, “After the oil sector,
the field of communications and
information technologies can be
intensively developed in our country.” In several ways, the year 2006
marked a watershed for the information and communications
technology (ICT) sector. In October 2006, a major trade mission
– BakuTel – advanced ICT opportunities domestically and for
potential U.S. investors. At BakuTel, President Aliyev reiterated
his deep commitment to jumpstarting the knowledge-based sector in Azerbaijan. The rapid growth
of technology will create ripple
effects for the country as a whole:
spurring economic diversification,
raising educational standards, and
advancing competitiveness in the
region.
In culmination of this pledge, the
Ministry of Communications and
Information Technologies signed
an agreement of cooperation with
the U.S. government to accelerate reforms. U.S. Ambassador to
Azerbaijan Anne Derse remarked,
“Telecommunications and information technology are
clearly promising sectors, essential for Azerbaijan to fulfill its goal
of rapid development of
the non-oil sectors of
the economy.”
The telecommunications industry represents
the fastest-growing and
most dynamic part of
Azerbaijan’s high-tech
sector. In a country
where mobile penetration is 27 percent and
soaring month by
month, Azercell and
Bakcell stand out as the
market leaders. In 2007,
a third mobile company, Azerfon, will launch
its operations. Ali Abbasov, Minister of Communications
and
Information Technologies, embraces policies
to fully liberalize the
ICTsector. By 2007, his
ministry plans to auction off its 35.7 percent Baku’s skyline is dominated by masts, a testament to the growing use of
stake in Azercell, the mobile telecoms in Azerbaijan and BakuTel’s commitment to advancing ICT.
IN BRIEF
Call Competition
EXPANDING at around 35 percent annually, the information
and communications technologies sector is outstripping Azerbaijan’s breakneck GDP growth
rate and is the fastest growing
part of the economy. The global
mobile revolution has opened a
gateway of choices for Azerbaijan’s subscriber base, which
tops 2.6 million. The cost of international mobile phone calls
has been slashed 20 percent.
Mobile and internet penetration
increases on a monthly basis.
While Azercell and Bakcell
continue to provide top-notch
service for its base of mobile
customers, newcomer Azerfon
is set to raise the bar for competition when it launches services
in 2007.
from the U.S. are interested in
creating this institution with us,”
says Minister Abbasov. So far,
Azerbaijani governmental committees have signed a protocol
of cooperation with Chalmers
University of Technology in
Sweden. This breakthrough
center for the dissemination of
high-tech knowledge will help
realize President Ilham
Aliyev’s vision to stimulate
educational enterprise through
information technologies.
vance bilateral cooperation for
future ventures and investments.
“Many American ICT companies are ready to participate and
make significant investments,”
says Ali Abbasov, Minister of
Communications and IT. “The
memorandum of understanding
guarantees participation from
American companies in Azerbaijan’s ICT projects.”
The Caspian
University
U.S. ICT cooperation
THE CASPIAN International
University of Information Technologies will open its doors by
2009. This institution is part of
ambitious plans to establish an
international ICT university in
Azerbaijan. “Large companies
IN OCTOBER, the Ministry of
Communications and Information Technology hosted the
BakuTel ICT Exhibition. The
exhibition’s profound success
was attributed to a groundswell
of interest from Silicon Valley,
centered on Azerbaijan’s hightechnology opportunities. A
memorandum of understanding
was inked between the U.S. and
Azerbaijani governments to ad-
BACKCELL
Baku ICT
Exhibition
The establishment of the
Caspian University and U.S.
input is carrying ICT forward.
2006 WITNESSED the inroads
of two major U.S. technology
firms into the Azerbaijani market: Cisco and Microsoft. In July, Cisco opened an office in
Baku. Three months later, the
U.S. major opened its Cisco
Networking Academy at Baku
State University to help develop
research, educational and civil
society capabilities through the
training of young ICT specialists. In February, General Director of Microsoft CIS Sergiusz
Wiza announced the opening of
a branch office in Baku. With a
starting budget of $1 million,
the company will expand its
network and train ICT specialists. Microsoft chose to operate
in Azerbaijan due to the country’s strong market prospects.
9
9/2/07
16:45
Página 9
Our World
AZERFON
Bringing competition to the sector
Dr. Ali Abbasov (left), Azerbaijan's Minister of Communications and Information Technologies,
and Jason Hyland, Chargé d'Affaires at the U.S. Embassy in Baku, following the award of a
USTDA grant for technical assistance.
Continued from page 9
international organizations to
close the digital gap between
Baku and the regions?
We have signed two agreements.
The first with the UNDP on egovernment, and the second on
expanding internet access for the
education and science communities. Our target is to develop society by improving access to the
information resources of the world.
The World Bank will also join our
e-government project. This initiative gives civilians the chance
to take part in governance to build
an information-based civil society.
The context of e-government in
Azerbaijan is accepted as a basic
model for the region. While
achieving these two projects we
want to strengthen socioeconomic development and give people a
higher level of freedom of expression.
The ICT sector is growing at an
unprecedented 35-40 percent
growth rate. Aside from the oil
industry, technology-based industries remain the most profitable in the economy. In your
opinion, what have been the
main key drivers of this boom?
Annual growth of the ICT sector is 5 percent more than the total economic growth of
Azerbaijan. Beginning in 2003,
the government initiated policies that made ICT the priority
sector for the Azerbaijani economy. The key driver of the development of the ICT sector is
that society, business and government are cooperating and interested in this area in unison.
The next priority for the ministry will be special technologydriven economic zones.
Presently, a consulting company and an international team of
experts are preparing recommendations which will be submitted to the government soon.
In this regard, I think that the
Azerbaijani economy will launch
a new stage of development.
In April, you visited the United States with a delegation
that included President Aliyev.
How has your ministry branded Azerbaijan abroad?
President Aliyev and President Bush agreed to deepen economic relations. After the oil and
gas sector, the ICT sector was
chosen as the second field for cooperation. About 40 percent of
the ICT market is currently dominated by U.S. multinational
companies, and the U.S. is the
largest source of investment. My
visit to Washington aimed to develop the ICT sector in Azerbaijan and to attract the attention
of American companies to the
Azeri market. We met with leading ICT companies, such as Microsoft, HP, and Cisco, who are
willing to invest in Azerbaijan.
Microsoft has some requests concerning the protection of intellectual property in Azerbaijan.
Our government will soon adopt
new legislation on with regard
to this issue.
I AS Azerbaijan emerges as a will be more aggressive in pencenter of excellence for infor- etrating the market.”
This drive for competition is
mation and communications
technologies in Eurasia, un- making a splash in Azerbaijan’s
precedented market growth is telecommunications market,
leading to new competition. which is today dominated by
This year, a third operator, Az- two big players – Azercell and
erfon, will launch its GSM mo- Bakcell.
bile services and shake up this
The emergence of a third opexciting market on a whole new erator owned by foreign capilevel. Siemens, Extel, and Cellex tal is part of a wider strategy by
Communications each hold 30 the government to develop the
percent stakes in the joint ven- telecommunications sector.
ture. Internet provider “Azerfon will breathe new life
Aztelekom, operated by the into competitiveness in the marMinistry of Communications ket. The new operator will creand Information Technologies, ate competition and will provide
for the deowns the remain‘To be a credible impetus
ing shares.
velopment of the
John Armley, competitor, we telecommunications
General Manager need to secure a field,” says Minister
of Azerfon, ex- good portion of of Communications
plains that the comthe market in and Informationpany has one
the shortest Technologies, Ali
general strategy: to
time possible’ Abbasov.
Azerfon is capicreate much needed competition in the market- talizing on its position as a marplace. “I think it is an ideal ket newcomer in these
opportune times, with the
location to be in,” he says.
“The GSM market here is at telecommunications sector in
least ten years old. Our objec- Azerbaijan rapidly becoming
tive is to get to where the cur- more sophisticated. In order to
rent leaders are within a much come out on top, Azerfon
shorter time. To be a credible pledges to invest $300 million
competitor, we need to secure over the next two years. Putting
a good portion of the market in this into perspective, it took
the shortest time possible. We more than a decade for Azer-
MARKET OVERVIEW
MOBILE
Year
Mobile
Subscribers
Mobile penetration
per 100 citizens
1997
38,300
0,9
1998
81,800
1,3
1999
209,600
2,0
2000
420,400
5,3
2001
730,000
7,9
2002
870,000
9,7
2003
1,055,000
12,8
2004
1,500,000
18,03
2005
2,242,000
27,0
JOHN ARMLEY
General Manager
Azerfon
cell’s competitors to channel
similar amounts into their operations.
Azerfon has secured a main
technical center for services and
has embarked on an extensive
program to build base stations
around the country. Initially, Azerfon’s service will cover Baku
and six major cities in Azerbaijan. Looking toward future
goals, Azerfon will rapidly increase its network to cover the
majority of the population in
the next several years. The emergence of a third operator will also gradually reduce mobile costs
throughout the country.
With Siemens as its largest
shareholder, the startup will be
equipped with the latest technologies. In 2006, Siemens supplied GSM base stations to
create a world-class network of
infrastructure. Azerfon has
teamed up with CBOSS, Russia’s largest software producer,
to implement network solutions
and advanced services for Azerfon’s subscribers. The new
entry has also selected major
suppliers for its intelligent network platform for service provision and billing. Customers
will have access to video calling, mobile TV, entertainment
and other top-notch services.
22/2/07
18:31
Página 10
Our World
10
AZERCELL
Investing in Azerbaijan’s workforce
Ten years of exponential growth has
placed Azercell at the forefront of the
mobile communications sector. Now
with 3G technology in the pipeline,
global expansion is calling
■ TEN years ago, President Heydar Aliyev made
the first digital mobile call
using GSM technologies
on Azerbaijani soil. This
small but significant step
signaled the first wave of
the digital GSM mobile
revolution to sweep this
young nation. A decade
later, Azercell Telecom JV
quickly emerged as the
leader in digital mobile
technology in Azerbaijan.
Its services are available
from the crests of the Caucasus Mountains to the
shores of the Caspian Sea
– and beyond.
Today, Azercell controls
75 percent of the Azerbaijani cellular communications market. Throughout
its ten years of success, new
advancements in technology and reduced tariffs have
boosted Azercell’s consumer
appeal. In recent years, its
subscriber base has grown
exponentially. The latest
milestone was achieved in
July 2006, when the company registered its two millionth subscriber.
Azercell is contributing
to the growth of Azerbaijan’s nascent information
and communications technologies sector. General
Manager A. Halim Ates
underscores that “employees in the ICT sector
have a very high level of
education and are very
keen to develop and improve. Investing in people
always gives us an immediate return. Last year, the
company spent half a million dollars in training.”
This equates to over
39,000 hours of personal
development training in
the past two years.
In total, Azercell has invested more than $500
million in the development
of digital cellular communications in Azerbaijan
and around the world.
Goals to approach Western
levels of mobile technology are quickly being
achieved and the operator’s intricate network of
cutting-edge technology
remains at the heart of its
success. During 2006, 328
new radio base stations
were installed, adding to
the 750 already in opera-
ly mobile operator in the
country to present an ecological assessment of its
Azercell
Total
services and its impact on
Prepaid
social economic life.
0
20 371
If service-based perfor1818
55 831
mance
and technology lies
128 561
179 640
at
the
heart
of Azercell, in341 494
380 857
vesting
in
people is its
478 392
519 346
soul. In March 2006, it be623 050
668 598
came the first company in
858 264
912 137
Azerbaijan and in the CIS
1 238 723
1 308 640
region to receive the pres1 656 385
1 741 374
tigious international In2 242 025
2 333 387
vestor in People award for
its unending commitment
mission rates and reliabil- to human resources deity have improved signif- velopment.
Over the past ten years,
icantly. Most importantly,
Azercell is working dili- the operator has donated
gently to obtain a 3G li- $5 million to charity orgacense to further advance nizations to extend a helping hand to internally
its services.
This investment in high- displaced persons, orphans
end technology has not on- and low-income families.
ly attracted a strong House of Hope, a center
customer base, but it has al- for disadvantaged children,
has greatly benso spurred the
‘Investing in
efited from these
launch of high
quality services people gives us philanthropic acimmediate
tivities. For its
and products.
The operator’s returns. People continuing outreach, the AzerRoamCell serare keen to
baijan Alliance
vice allows subdevelop and
for Children’s
scribers to make
improve’
Rights presented
calls in 135
countries around the world. the company with its Leave
The newly launched No Child Out award.
Azercell also spreads the
ZengimCELL service enables customers to person- joys of Azerbaijan’s vibrant
alize ringtones from choices cultural and artistic life. It
on a website at the touch of is a key sponsor of the Baku
a button. Three years ago, Jazz Festival, which this
Azercell Express opened its year featured American
first store as a “one-stop legend Herbie Hancock. As
shop” for sales and customer a cultural benefactor, the
company continues to bring
service.
As one of the largest masters of Azerbaijan’s
companies in the country, rich musical legacy to rapAzercell understands its turous audiences at
socio-economic responsi- renowned institutions
bilities and commitments across the country, includto the country. The coming the Azerbaijan State
pany is the largest taxpayer Philharmonic. Approachin the non-oil sector of ing its second decade of
Azerbaijan, and in 2005, service, Azercell continues
Azercell payments to the to position itself as a qualstate budget were equal to ity operator, and a funda4.09 percent of the total. mental pillar of the
Azercell is also the on- community.
NUMBER OF SUBSCRIBERS
Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Azercell
Postpaid
20 371
54 013
51 079
39 363
40 954
45 548
53 873
69 917
84 898
91 362
tion. In total, Azercell has
installed two home location registers, 13 base station controller systems, 16
mobile services switching
centers, and 1,078 base radio stations.
By implementing Enhanced Data Rates for
GSM Evolution (EDGE)
technology, data trans-
Azercell has devoted more than $500 million to digital
telecoms and subscribers can make calls in 135 countries.
INTERVIEW
IN BRIEF
‘Azerbaijan and its people
deserve all the best’
A. Halim Ates, General Manager of
Azercell, outlines the company’s
philosophy and its vision for the future
renegotiated prices for international calls. Little by little,
we are moving toward a liberal and free market.
■ What do you condider to In 2005, investments nearbe the driving force behind ly doubled from the preyour company’s success?
vious year. What are the
Since the beginning, our directions and expectastrategy has been to bring the tions on investment relatest technologies and prod- turns?
ucts from all over the world to
We are investing a lot in raAzerbaijan. We are approach- dio base stations and since the
ing more than 2.3 million sub- number of subscribers is inscribers. We have invested creasing, we are boosting camore than $500 million in the pacity as well. We applied for
past 10 years, a
‘Most of our a 3G license and
huge investment
now expect to refor the telecom- employees have ceive it. For 2006,
munications in- been here from we ended up with
dustry. We have the first day and $130 million in inbrought new
vestments, and we
are loyal to
things to the mar- Azercell as if it intend to do the
ket and we have were their child’ same in 2007. We
applied internaopened the first Aztional standards like a 24/7 call ercell Express centers, a sort
center, front offices, general of one-stop shop. In addition,
packet radio services, and so we are also opening ofon. We continue to focus on im- fices in Baku and outside
proving the quality of our prod- of the capital. Azercell will
ucts, services and technology. continue to increase moIt is not unusual for us to bile penetration in rural
be the pioneer country in areas.
the implementation of new
projects, because people What other challenges
here in Azerbaijan are flex- do you foresee for the fuible and open to improve- ture?
ment. Azerbaijan and its
At the moment, the govpeople deserve all the best ernment is working to liber- it’s our conception. From alize the ICTsector. President
a human resources point of Aliyev launched an e-govview, we hired people from ernment project in which we
Azerbaijan and they are the are involved. In 2006, we
ones who brought Azercell made concrete steps toward
to the level it is now. Most standardization of inter-conof our employees have been nection agreements among
here from the first day and the operators. Moreover, the
are loyal to Azercell as if it government revised all interwere their own child.
national agreements and
Where do you see further
cooperation between Azerbaijani and U.S. ICT companies?
U.S. companies need to understand how the market is
growing and find their niche.
Investors can come and co-operate not only with Azercell,
but with other operators as
well. Our company is part of
Fintur Holding, which operates in four CIS countries
and has always been a pioneer for anything new. If
co-operation with Azercell
is successful in Azerbaijan,
we know that it will work
in other countries as well.
The market is now
ready for anything.
We welcome foreign
investors and will
be pleased to
provide
t h e m
that we are part of this country and the community. It is
our responsibility to contribute
to the development of the people. In each project we develop, we evaluate the impact
it will have on the people. We
don’t want to be a simple sponsor; instead, we favor partnerships. This is what we have
done for example when we set
up the Azercell Academy, an
education and training center
unique in this region. This
project is very important for
us because we consider that
transfering our
knowledge to
the people is
part of our
social responsibility.
Global services
AZERCELL Telecom JV
belongs to a family of
trend-setting mobile
providers. Majority
shares are controlled by
Fintur Holdings, a pioneer of mobile telecommunication services
spanning Eurasia. The
network coverage of Fintur reaches 23 million
mobile users in Kazakhstan, Georgia, and
Moldova.
Expert partners
FINTUR HOLDINGS is
a partnership of Stockholm-based TeliaSonera
and Turkey’s largest mobile provider TurkCell.
The two European telecom leaders control
58.55 percent and 41.45
percent of Fintur’s shares
respectively. General
Manager of Azercell
Telecom, A. Halim Ates,
brings years of expertise
working in Fintur Holdings to shape Azercell’s
vision for excellence. As
a valued component of
the Fintur group of companies, Azercell sets the
benchmark for standards
of excellence in Eurasia.
A private affair
with any kind of
information or
support they
need.
How would
you evaluate
Azercell’s social commitment?
Our ten year
history proves
THE MINISTRY of Information and Communications Technologies of
Azerbaijan owns 35.7 percent of Azercell. In 2007,
these remaining shares
will be auctioned off to
investors. According to
market analysts, the company may fetch up to
$240 million, becoming
Azerbaijan’s largest privatization to date.
The firm will install 400 additional base stations.
BAKCELL
Key mobile
provider
opens a
new era of
telecoms
Affordability, technological
advancement and simplicity
have given the nation’s
second largest company an
upper hand in the market
■ IN NOVEMBER 2006, a milestone event captured the attention of Azerbaijan’s press corps. As
television cameras and reporters clicked away, a ribbon was cut to commemorate the opening of a historic new venture. Parliamentary representatives
and leaders of the local business community stood
proudly among other honorary guests.
This celebration was not commemorating the opening of an international pipeline or an oil refinery.
Bakcell, a leader in Azerbaijan’s cellular industry, commemorated the launch of its commercial mobile services in the western region of Nakhichivan,
heralding a new era for the Caspian Sea country’s
rapidly growing information and communications
technologies sector. Always ahead of the game, Bakcell’s launching of commercial mobile services in
Nakhichivan signaled the company’s ongoing commitment to make inroads and expand its presence
across the country.
Bakcell stands tall as the second largest mobile
telecommunications company in Azerbaijan. Its
market-led, quality driven approach is based on
three core values: affordability, technological advancement, and simplicity. Bakcell’s competitive edge
is evident by the growth of its ever-expanding network. The company now services coverage across
the entire Azerbaijani landscape. Bakcell is forging
ahead with its targets to open service centers in regions across the country including Ganja, Sumgait,
Sheki-Zagatala and Lenkoran-Astara.
In March 1994, Bakcell was established as the first
cellular communications operator in Azerbaijan,
serving as the model for the nascent high-tech sector. In December 1998, Bakcell was the first in the
country to implement GSM telecommunications
technology. Since the company’s inception, it has
provided personal communication in compliance
with the most competitive international standards.
In December 2003, the company's privatization
process was successfully completed and months later, Bakcell began functioning as a fully privatized
company. Emphasizing a customer-oriented position in the emerging telecommunications market, Bakcell introduced a wide range of mobile products and
services aiming to attract and retain customers with
various service needs from both post paid and prepaid markets.
Bakcell moves into its second decade of service
at a moment when the telecommunications industry is poised for new breakthroughs. According to
Ali Abbasov, Minister of Communications and Information and Technologies, revenues from knowledge-based industries such as mobile communications
will exceed income from oil exports by 2015.
Always at the forefront, Bakcell is ready to capitalize on its rising popularity. A customer-led approach is quickly catching on with its ever-growing
subscriber base. In 2005, Bakcell slashed its prices
between 33 percent and 82 percent as part of a plan
to edge out its competitors. Recently, the pace of new
subscriptions has increased dramatically to 700,000
subscribers. Bakcell has also dramatically improved
its market share in part in implementing an aggressive and clever marketing campaign appealing to
young, ambitious Azerbaijanis.
Since 1994, Bakcell has invested around $100
million in its services. A3G network is being rolled
out, and more network upgrades and equipment
investments are in the pipeline. Taking the helm
as General Manager in 2006, Martin Quirke is
moving forward with an ambitious plan to revitalize technological infrastructure and to expand
Continued on page 11
11
9/2/07
16:52
Página 11
Our World
INTERVIEW
‘Our motto is to be marketing
led and quality driven’
MARTIN QUIRKE, Bakcell’s General Director, speaks
about the company’s strengths,
its expansion and its unwavering commitment to customer
satisfaction.
Customer service: the company offers a wide range of innovative, state-of-the-art products.
Continued from page 10
Bakcell’s network coverage.
To mark its tenth anniversary as one of Azerbaijan’s top companies, the mobile operator invested massively in expanding its coverage to all
territory and offering innovative, state-of-the-art
products. In September, Bakcell installed 51 base
stations in large part to expand its presence in Azerbaijan’s regions. In the near future, approximately
400 more stations will be installed.
Customer service is at the cornerstone of the
company’s growing appeal. Bakcell presented
KLASS, a service where customers determine
their tariff plan. CinKart, a prepaid service, enables flexibility and freedom for customers.
Wireless Application Protocol technology allows
users to surf the internet. Bakcell’s Gold Club
is yet another service established with the aim
to provide a personal, efficient, and high-quality added value for the company’s expanding
customer base.
“Bakcell is favorably disposed towards the
concept of social responsibility,” says Mr. Quirke.
“We are here to make a contribution, to take Bakcell to another level. I don’t just want to run a
mobile phone company, but try as best as I can
to make some kind of contribution to take Azerbaijan some steps up the ladder.” In its decade of
service, Bakcell has reached out to children with
disabilities and orphans. One of its longstanding
partners has been the Azerbaijan Red Crescent
Society. Carrying out various projects in both the
social and business areas, Bakcell understands
its positive impact on society, and looks forward
to bringing noticeable benefits to Azerbaijan’s new
era of socioeconomic potential.
IN BRIEF
A premier telecoms company
BAKCELL is one of the most influential private
companies in the country. In 1994, Israel’s
GTIB and the Ministry of Communications and
Information Technologies established the joint
venture which quickly became Azerbaijan’s premier digital telecoms company. In December
2003, GTIB fully acquired Bakcell by purchasing the remaining shares from the government
for $5.1 million.
Upgrading coverage
IN OCTOBER, Bakcell announced its goal to upgrade network to sophisticated 4G mobile technologies. Soon, Bakcell’s growing network will
support advanced services such as WiMax, which
will allow data to be transmitted over super high
bandwidth connections. On this platform, different data types will converge, such as and voice
over internet and streaming video.
New roaming service
BAKCELL continues to develop its mobile operations in Azerbaijan and abroad. By signing a
host of roaming agreements, Bakcell subscribers
can use international roaming services through
223 mobile operators in 125 countries. As the
company increases the number of roaming partners among GSM operators worldwide, it is
meeting objectives to become a regional player in
Eurasia’s fast-paced telecommunications market.
Bakcell is the second largest
mobile phone operator in
Azerbaijan. What defines
your company’s strengths
and potential?
Twelve years ago, Bakcell
became the first mobile venture involving foreign investment in Azerbaijan. When the
company began, it started with
TASC technology, but later we
won a GSM license. For a while
we were the only mobile operator and had the monopoly of
the market. The company chose
to keep abreast with the competition and there was a lack of
investment. I have been brought
into the fold and the new Bakcell, with a new management
team and strategies, started in
2006. So we have already started on that road to improve our
capabilities.
We have 400 employees, and
this number is increasing all
the time. We have a presence
that is going to grow throughout Azerbaijan. Taking care of
our employees and our commitment to transparency has
been successful, and this is the
real message to pass on. Azerbaijan is being acknowledged
by more and more countries.
Technology is an essential part
of every day life and there is an
increasing appetite to reach European levels of technologies.
That is what Bakcell is working on right now.
In 2005, the number of customers more than doubled to
700,000 and your market
share recently increased to
30 percent. What have been
the key drivers behind this
successful expansion?
There has been more emphasis put on marketing than in
the past. And to back that up
there were also investments to
take on more customers. When
I arrived, Bakcell was seeking
to expand the network coupled
with an effective marketing
campaign. We took up first time
mobile phone users, as well as
MARTIN QUIRKE
General Director
Bakcell
customers from the competition. Our fare reductions gave
us more competitive prices. In
other words, people believed
that they would get more value for their money, and we hope
that we can keep that going.
What are your investment
priorities for the coming
years?
Quality and competitiveness
are our priorities. We just finished a short-term improvement project for improving the
quality of Baku’s network. This
will be followed up by another huge project, which we hope
to sign a deal that will consol-
idate our network in the greater
Baku area. That will also release a lot of equipment to reinforce our presence in the
region where we are weak. So
the emphasis is on the consolidation of the network in the
greater Baku area, but also in
the regions as well. We doubled
our customer base in 2005 and
we intend to build on that and
not to lose the momentum that
we have built up.
How would you define your
commitment to customersatisfaction?
Customer satisfaction is extremely important to Bakcell.
I have spent a lot of my career
facing customers and managing customer service so one of
the first things that I did here
was to expand and relocate the
call center, the interface with the
customer. We invested quite a
lot of money in that customer
relationship management system. In all honesty, the concept
of customer service is generally a weakness in Azerbaijan,
so I am very keen on addressing that and developing that.
What are the targets and major challenges that you are
facing in this competitive
market?
Our mission statement is
“marketing led, quality driven.”
Before, Bakcell was more focused on technologies and engineering concepts and not so
much on sales and marketing.
Bakcell is very focused and
concerned on its marketing and
customer care and basically on
giving better value for an equal
or better quality. We also want
to transform the image of the
company to one focused on
quality and value.
9/2/07
16:52
Página 12
THE STATE OIL COMPANY OF THE REPUBLIC OF
AZERBAIJAN (SOCAR) IS ONE OF THE
LARGEST OIL COMPANIES IN THE WORLD.
AS THE GOVERNMENT-OWNED ENTITY
RESPONSIBLE FOR ALL ASPECTS OF
EXPLORATION AND DEVELOPMENT RELATED
TO THE OIL AND GAS FIELDS, BOTH ONSHORE
AND OFFSHORE, WE HERE AT
SOCAR
ARE DEDICATED TO IMPROVING THE
INDUSTRY’S MANAGEMENT STRUCTURE
AND FOSTERING THE EXPANSION OF THE
PETROLEUM ENERGY COMPLEX.
WITH AN ENVIABLE PRODUCTION STRENGTH
AND WORLD-CLASS SCIENTIFIC AND
TECHNICAL POTENTIAL, WE HAVE
BRANCHED OUT AND GONE BEYOND THE OIL
INDUSTRY TO OFFER AN EXTREMELY
WELL-DEVELOPED SERVICES SECTOR.
BUT WE ARE MUCH MORE
THAN AN INSTITUTION,
MUCH MORE THAN A
LIVING, BREATHING
COMPANY. WE ARE PART
OF AZERBAIJAN- A DRIVING
FORCE BEHIND THE NATION’S
GROWTH AND FUTURE.
AS A MAJOR WORLD ENERGY
PRODUCER, WE NOT ONLY
CONTRIBUTE TO THE AZERBAIJANI
ECONOMY BUT TO GLOBAL ENERGY
SECURITY AS WELL.
www.socar.gov.az

Azerbaijan - United World

Transcription

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