Economic
Opportunities
Bulletin |
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MERCY CORPS
INTERNATIONAL |
37 v, Suleyman Rustam street,
Baku-370007, Azerbaijan
Tel: 40 02 41 Fax: 41 10 65 E-mail:cathy@mci.baku.az
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GOVERNMENT NEWS
AGRICULTURE
ECONOMY
FINANCE
PROGRAMS
l The first
reading on selling of land took place in the parliament session. The bill is con-tinues to
ban the sale of land. There are some arguments on this matter among different agrarian and
executive committees.
l The International Conference on
Removal of Infrastructure Financing Gaps took place in Poland in May. Representatives of
International Financial Institutions and countries of European Union parti-cipated in this
conference. Namik Nasrullayev, the Ministry of Economy represented Azerbaijan. The aim of
the conference was infrastructure investment assis-tance in the Central and Eastern
European countries and creating linkages between the private and state structures.
Websites |
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* The ILO has a
website on Enterprise & Cooperative Development. This website covers topic on
business deve-lopment services, gender issues, policy, job quality and social finance. It
lists specific traning programs such as "Start & Im-prove Your Business". It
can be found at: http://www.ilo.org
/public/english/65entrep/isep/ind-ex * The Virtual
Library on Micro-credit which lists work-shops and upcoming events, micro-finance
networks, papers on select topics, case studies, and other internet sources and can be
found at: www.soc.titech.ac.jp/icm
* The World
Bank has two main sites focusing on microcredit activities. The first is CGAP the Consultative
Group to Assist the Poor, which started in 1995. The goal of CGAP is to expand
very poor peoples access to quality financial services: www.worldbank.org/html/cgap/cgap.htm
* The Enterprise Development website is very good.
It covers a wide range of topics in addition to micro credit such marketing, business law,
technology, women, regional links, and economics. The site provides links to other sites
with a rating scale and brief description. www.enterweb.org
* The Microfinance Network is a global association
of leading microfinance practitioners. The members are committed to improving the lives of
low-income people through the provision of financial services. www.bellanet.org/partners/mfn |
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http://www.azerweb.com
AzerWeb is a website producing and delivering information on humanitarian sector
activities in Azerbaijan. Its mission is to promote dialogue and information sharing
within the relief and development community in Azerbaijan. Save the Children implements
this program under with MCI umbrella grant. Entering the website at is free of charge and
you can get information on the following
- Humanitarian Efforts in Azerbaijan
Most recent additions, Press Releases/
Meeting minutes, Regional location of IDPs-Maps and Graphs
- Directory of Relief and Development Agencies
Organizations' status, activity map, program description, links to local and
headquarter websites
- Relief and Development Sectoral Issues & Websites
Assessment, strategy reports and development plans, Sectors of humani-tarian
aid, Relief and Development reports & links, Government press releases and policies on
IDPs
- Information about Azerbaijan
Oil history, Country profile, Security/
Country risk reports, Business directories and investment information
- News, Employment, Education, Embassies, Media and Calendar
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Sources
used:
"Sharg" daily news bulletin
Interview with Ministry of Agriculture
Websites of World Bank |
Control Books
Following the Presidents decree on Improvement of the State Control System and
Removal of Artificial Obstacles in Business Area of January 7, 1999, the State
Committee for Anti-monopoly Policy and Business Support (SCAP) printed a Control Book. The
purpose of the book is to improve the monitoring of the checks being carried by Government
Inspection Authorities at Azeri and foreign businesses. On the first page State rules on
inspection of enterprises are stated. The remaining pages are a table in which the
Government authorities eligible to check businesses are listed and columns for recording
inspection details. Each visitors name, the name of the organization, objectives and
autho-rization letter of his/her organization to conduct should be recorded.
The book also includes a reporting format to submit to the State Statistics Committee
(SSC) every six months. Any business can obtain Control book from SSC of the region
where it is registered for 12,500 manats.
Local production of wine and vodka is going to be re-established
Details of the presidents decree issued February 5, 1999 on regulation of
production, import and trade of Alcohol and tobacco products was printed in the
previous issue of EO Bulletin. According to this decree, the entities involved in
production, import and trading of alcohol and tobacco products are required to get a
special license and excise marks from the Government to continue their business. The
supply in the market is fallen, because of the sudden break on alcohol and tobacco
trading. Consequently the prices for these items have risen. The price increases have
results in a drop in demand of locally produced wine and vodka, the entire production in
the factories had been stopped. Market prices are declining as the number of the entities
obtaining special licenses increases. However, criteria used for the obtaining the license
will not allow all players to return back to the field. This has also resulted in illegal
production. In order to restart production in Wine factories and compete with illegal
production, the Cabinet of Ministers issued a new edict on this issue. According to this
document, the excise duty on wines is reduced from 45% to 20%, and on brandy and vodka
from 65% to 25%. Sharg news agency informs that after this edict the production in
the factories, the Wine factory #1 is going to re-establish the production.
Will government be able to prevent illegal import of excise goods?
Sharg agency reported that in May the Ministry of Trade transferred more than 43
mln. Manats to the state budget. This money was collected from the licensing the import of
alcohol and tobacco. Despite the activities of Castel beer factory in Khirdalan, the
importation of beer increased due to the summer season which is exceeding the volume of
legally licensed import. Illegal import of goods is on going and has been caught at Samur
and Yalama customs offices. Tax authorities will continue to adhere to licensing rules and
inspect the licenses and the excise marks on alcohol and tobacco products in all trade
points.
New changes in taxation system
IMF Tax Administration Councilor Joe Hook visited Azerbaijan in May. The purpose of his
visit was to meet government officials and discuss the draft of the new simplified tax
code of Azerbaijan. After IMFs review the final draft passed to the Cabinet of
Ministers. The new simplifications will benefit small and medium businesses. Minimum
taxable salary has been increased from 60,000 to 80,000 manats. If the income of the
enterprise doesnt exceed this amount it should pay just 5%. This tax rate is lowest
rate within the CIS countries.
Mr. Hook and authors of the Tax Code differed on the issue of property seizure of those
avoiding taxes. The Constitution of Azerbaijan states that private property can only be
taken by the decision of the justice court. Experts say that it doesnt suit to Tax
Authorities, as they should be acting independently. Mr. Hooks opinion is that the
court makes the final decision but the order for arrest of property should be written
prior to the court affair.
Uncollected taxes are the major cause for budget deficit in Azerbaijan.
For the last 5 months the budget has collected 247.5 billion Manats less than the
forecasted amount. This is primarily due to the failure of Tax Inspection to collect from
taxpayers which accounted for 87% of expected funds. Analyses revealed SOCAR, Azergaz,
Azerenergy, Azerkimya are delinquent in their payments.
Irrespective of the reasons the government is left with a budget deficit. Ministry of
Finance (MoF) is looking for alternative sources and decided to address the International
Financial Organizations. The primary aim of MoF is to clear out the debt for salaries and
pensions for the months of April and May. In the end, the revenues from privatization and
partly by World Bank credit the MoF will be able to pay 35 billion manats to overall
pension debts by the mid June. The MoF increased the deductions, the direct transfers to
the pensions fund from budget and the salaries and pension debts for April were
cleared. At the moment, salaries and pensions for the May are being paid.
The World Trade Organization runs a seminar
A regional seminar on multilateral trade system was held in Tbilisi in May. The Azeri
delegation was comprised of representatives of from four Ministries, 2 State Committees,
the State committee for science and technical research, the Center for state standards and
meteorology and the Authority rights agency. Principles of multilateral trade system,
specific features of liberalization of trade and how to join the World Trade Organization
were the main discussion topics of the seminar.
Firm cuts
prices on agriculture equip-ment
Azerbrtraktor, an Azeri-Turkish joint venture announced its plan to lower prices on
last years equipment. Prices are being reduced by 25-33% on tractors ranging from
$10,000 -15,000. The company also leases equipment and provides one year guarantees. The
firm has been talking with the Ministry of Agriculture about future collaboration.
Currently, 30 farms have received equipment from the Japanese Government on four-year
leases. But the specialists believe this may be difficult because many farmers are not
able to provide their lands as collateral.
Dutch government agriculture grant
The Dutch government plans to grant $1.5 million under the Program to assist Central
and Eastern European Countries (PSO). PSO has selected three projects of which one targets
agriculture sector. The project will reconstruct insemination stations and provide
consulting services to farmers. The GoA has also requested assistance in production of
high-yield wheat seeds. Current PSO project include a project to develop potato seeds
domestically. The $750,000 project is being implemented in Tovuz with 25 participants on
30 hectares. The seedlings were planted in April. Potato harvesters will be imported to
assist in the fall. Plans are to expand to 200 hectares next year.
Turkey firms helps farmers grow cotton
MKT, a Turkish firm through an agreement with Ministry of Agriculture will provide
fertilizers and pesticides for cotton farms in seven regions. After harvest, MKT would
then purchase the cotton with the price of the inputs deducted from price. MKT has
suggested a price of 1 million Manats per ton but the Ministry would like to wait and
determine the price based on global market price at harvest time.
3 week visit to Mexican center on corn and wheat
Two representatives from Azeri Research Institute of Plants completed a three-week
visit to Mexico and US. The purpose of the visit was to study varieties of wheat and corn
and identify options for planting in Azerbaijan. They reviewed different channels to
disseminate research results to farmers. In addition, they reviewed the activities of
Mexican farmers associations. In Mexico association members pay fees and are provided
with marketing services.
New farms to be created
The Ministry of Labor with funds from Social Welfare fund are providing interest free
loans for job creation activities targeting IDPs according to Deputy Chairman of the
General Employment Department of Ministry of Social Welfare, Rasim Gasanov. After regional
needs assessments of unemployment are prepared business plans are submitted including the
repayment schedule. In Agcabedi they have approved an agriculture project with 15
employees. In another location in Beylegan for a wheat mill employing 30 people. Projects
range from $15,000 25,000. Since 1997 12 projects have been started in eight regions
providing 300 IDPs and refugees with employment
Further Agrarian Reforms
Continued reforms in the agriculture sector are expected to continue until 2001
building upon the current reforms were announced by Minister of Agriculture, Irshad
Aliyev. While many of the current reforms have yet to be completed or started in some
instances, the identification of next steps continues. The document has been submitted to
the Presidents office for review. Several areas being reviewed are access to credit and
equipment and information needs of the approximately 30,000 farmers nationwide. The
current reforms were launched in 1994 based upon a series of bills on Agrariain Reform,
Reforms of State and Collective Farms, and Land Reform.
Negotiation manual
for businessmen
The Institute of Social Management released a manual on Negotiation skills target small
and medium entrepreneurs. The book covers nego-tiation preparation, physiological tactics,
and how to conduct business meetings. Six hundred copies will be circulated.
Seminar on business development & venture capital
On June 25 a seminar sponsored by Eurasia, Academy of Sciences, Economists Union,
Bulletin of Businessmen, AED, and Managers Union was be held. The purpose of the
seminar was to create an association of venture capitalists.
Azeri Businessmens Association extends its activities
In the last EO bulletin, we highlighted the formation of the Azeri Businessmens
Association (ABA). In the last two months the ABA has grown to include 120 members, 7
associations, and 5 unions. In addition, the ABA has joined five international programs
that provide technical assistance. These include the Managers Training Program, Small
& Medium Enterprise Development Program, British Executive Service Overseas (BESO)
Netherlands Management Co0operation Program, and Joint Industrial and Commercial
Attachments Program. The aim of the BESO program is to provide assistance to small and
medium businesses.
Bankers School
The Barrents Groups held a five-day course on credit analysis for the Association of
Azeri Banks sponsored by USAID. The course will train bank staff to analyze and make
effective loan decisions to avoid problematic loans.
Microfinance Center for CEE and NIS
The World Bank via CGAP and USAID are collaborating with Microfinance center to expose
regions micro credit practitioners to best practice materials and knowledge in
financial management to improve skills and ultimately institutions. The Center is based in
Warsaw, Poland and represents a network of 37 micro finance institutions. The Center
provides technical assistance and training, best practice information, legal research and
other services to member institutions. The next training sessions are scheduled for
September and will cover financial analysis and interest rates and delinquency control.
For more information please contact the center directly at microfinance@zigzag.pl
Oil sector Investments
President Aliyev has signed more oil contracts with Mobil, Exxon and Moncrief Oil
International during his stay in the US. To date, only one consortium, the Azerbaijan
International Operating Company, is producing oil in Azerbaijans sector of Caspian. All
other groups are still searching. It is expected that if large quantities of oil and gas
are found, the foreign oil companies will invest additional $50 billion. Many oilmen now
maintain that early reserve estimates were exaggerated, as recently two consortia did not
find quantities of hydrocarbons. Housing prices dropped by 30 to 40 per cent in the
capital city of Baku and some small businesses have closed with the departure of the
consortia. To call it another Kuwait is probably over the top, says one western
oilman working in the Caspian. Its probably more comparable to the British sector
of the North Sea.
Azerbaijani growth slows
Azerbaijans domestic product (GDP) expanded by 5.8% during the first 5 months of
1999 compared with the same period last year, representing a sharp drop on an annual
basis. Growth on the first 5 months of 1998 was 8.9%. GDP stood at 1.3 billion dollars for
the January-May period of 1999 or $166 per capita. Total industrial output increased by
2.6% to $1.1 bn, most of it due to oil consortium (AOIC) however, other major production
sectors like the chemical, machine building and light industries experienced a sharp
decline.
New mini-plants to be built
This year Hayal Company is going to start the construction of two mini-plants on
production of condensed milk and tinned beef. Currently the company employs 120 people and
this figure will reach 800 people after starting the construction work. Hayal has been
operating since 1992 and is mainly involved in trading of food goods.
Business Problems
Committee for Antimonopoly policy is concerned with joint venture (JV) reduction in
country. The Committee has proposed some change to encourage JV activities such a review
of state duties for registration process. The plan is to encourage domestic production for
processing of agriculture products and encourage JV activities in industry and promotion
of exports. Additional activi-ties in the proposal included decrease of customs duties on
imported goods parti-cularly raw materials needed for manu-facturing of export goods. 55
foreign private enterprises were surveyed prior to developing this proposal.
Production of Tea Leaf is Restored
During a visit to 12 regions of the country, First Vice Prime Minister Abbas Abbasov
surveyed the agriculture activities of those regions. He specifically noted a good harvest
of potato nationwide, and vegetable and rice particularly in the Lenkoran-Astora zone. He
also discussed the creation of a Tea producer association uniting both farmers and
processors. He indicated the government would also be promoting tea production. Currently
there are eight tea factories but the privatization of these factories has not been very
successful.
Farmers not only learn by practice but by theory
By the end of this year the fourth book for farmers will be release by the Central
Working Body implementing the World Bank Pilot Farm Project. Previous books include topics
on land reforms, raising of citrus plants, stockbreeding, organization of private
agriculture enterprises, and market information.
Educational
opportunities for Azeri bankers
The Executive Director of the Egypt Institute of Banking mister Shadki Faraj has been
visiting Azerbaijan in June, last month. During this time he visited the Association of
Azeri Banks, as the purpose of his visit to this country was to learn the situation of
banks in Azerbaijan. The visitor was requested by bank managers to help Azeri bankers to
raise their capacity in Banking. Following to that request the Commercial Banks will have
an opportunity to send their officers to Cairo in order to receive appropriate education
in international systems of payments, financial transactions and accounting. This
opportunity earlier was accessible only for the officers of National Bank. This program
will start this October.
Activities to improve Agroprombank continues
There is a memorandum signed by the Agroprombank, the Ministry of Finance (MoF), the
National Bank (NB) and Government of Azerbaijan (GoA) that Agroprombank by January 1, 2000
should prepare for privatization. Internal changes are being carried out in order to make
the bank more efficient and realistic in terms of financial and human resources
allocation. Agroprombank will only use 30% of repaid credit to issue new loans. Except
World Bank credit for farms no institutions including MoF and NB can invest any capital to
Agroprombank. Accepting of deposits from population will be suspended, 6 bank affiliates
should be removed and 80 staff officers are to be reduced, the number of its branches will
be reduced to 5 from 42 currently existing.
KFW Bank works out micro and small credit terms
German-Azeri Foundation is going to introduce micro and macro loans to support micro
and medium businesses in Azerbaijan. The credit sizes accordingly will be micro-credit
maximum $15,000 and small-credit will be maximum $50,000. Partner banks (PB) which will be
selected on tender basis will deliver the credit. Criteria in selection will include the
size of authorized capital of a bank, number of clients and the National bank reference
whether the bidding bank is meeting all NB requirements. The essential capital of DM 10
mln will be injected from German KFW bank for 40 years period with 10 years of grace
period and with 0.75% annual interest rate. Then this amount will re-credit to the partner
banks through GAF with 3-4% annual interest rate. PB also will have to pay commission fees
of 1-4% per annum. Repayment of credit will start from 2010. KFW bank also is planning to
allocate DM2 million for training of the personnel of partner banks. The grant will cover
the consulting costs and international auditing costs of partner banks.
EBRD credit lines in Azerbaijan
Last summer a credit agreement between European Bank for Reconstruction and Development
(EBRD) and International Bank of Azerbaijan was signed in London. The aim of the credit
line is to support small and medium business. According the information obtained from the
IBA chairman the amount is to be raised from $3 to $5 mln. To confirm this change a
mission headed by David Hexter, the first Vice Premier Deputy of EBRD is going to visit
Azerbaijan. IBA has already disbursed the first trench of $500,000 as a credit to the
private sector businesses. There are some other projects under selection processes. This
time the IBA will give a priority in selection to the firms involved production projects.
The IBA stated recent crises in private sector and scandals in banking sector are main
reason entire amount was not disbursed. Azerdamiryolbank is partner of IBA in this deal.
Loans are given from Azerdamiryolbank for construction of mini workshops, furniture
manufacturing and production of food conserves. The credit amount may be from $5,000 to
$100,000 and for maximum for 4 years of repayment period. IBA offered to EBRD to purchase
20% of its shares as the bank is looking for a shareholder with high rating in the
International Market.
TACIS
programs
l Regional pilot ag-ribusiness assistance
union project. Pro-ject began on January 1998 and will end on January 2000. The budget
of project is 1.3 million ECU. Ganja, Sabirabad, Ismailli, Guba districts are the areas of
the project implemen-tation. Terra Consulting ltd. (Finland) oversees the project. More
information about this project can be obtained from Poll Strong.
l Pilot credit unions, the European Union
Corporation Fund is going to fund this project. Overall budget is $15mln. The project will
be implemented by Agrarwirtschaftlich Berating Gottingen (German). Contact person will be
Bernard Vendel and Gas Bertfort. Project life is 18 months and it is going to start soon.
WB projects
l Pilot farms. The project includes
grants to create six pilot farms. It started 1997 and will end 2001. Overall budget is $
28.8 million. International Fund for Agricultural Development overseeing the project. To
date these farms was created in Ujar, Salyan, Lencoran, Khachmaz, Barda and Nakhchivan.
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