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 Report - MCI Economic Opportunities Bulletin (MC)

 Report date: 30.11.1999



37 v, Suleyman Rustam street, Baku-370007, Azerbaijan
Tel: 40 02 41 Fax: 41 10 65


December 1999 Volume I No. 6








Tax Revenues continue to rise

Tax revenues to the State Budget for October totalled 194 million manats, 103.0% of forecast. Analysis of tax revenues and payments since July show that tax revenues continue to rise from 118 330.8 million manats in August to the October level. The SMTI asserts the results were reached at the expense of joint work of the Inspectorate with the National Bank of Azerbaijan toughening of control over installation of cash registers at trade points and increasing number of fines in respect to rule breakers.

During the first 10 months of 1999, 9074 establishments were inspected regarding following of regulations on cash payment according to Chief state tax inspection committee. Of those establishments 53% were in violation of the regulations on cash register. Penalties of 10.2 billion manats were imposed of which 33% have been collected. Also, 39% of those inspected were cited for other violations and fined an additional 7.6 billion. The tax inspection committees have increased the inspections of cash transactions.

SPC Deputy Chairman Dismissed

Yesterday Heydar Aliyev dismissed the Deputy Chairman of the State Property Committee Barat Nuriyev. Because of the delay with SPP-2 adoption, the fact that President's Office has been discussing it. As the SPP-2 prepared by a team leaded by Nuriyev caused many disagreements at economic departments. The work to improve it is being conducted currently. The Leadership is held up on conducted reforms. That is why officials who fearing that consequences can turn out against them are only make imitation of economic changes but do not conduct them in fact.

One can relate to reasons for Nuriyev's dismissal the discontent of the Government with the first phase of privatisation. As a result it grounds appeared for replacement of the old team with a new one in order to lump the blame for all mistakes made in the course of SPP-1 implementation on it and carry out a new privatisation strategy with the new team.


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The newspaper was founded in 1990 by the State Committee for refugee and displaced (IDP) affairs. It is published each week. Major topics highlighted are

  • Day to day refugee and IDP problems
  • Political events regarding refugees and IDPs
  • Delegations who visited refugees and IDPs
  • State legislation and Presidential decrees affecting refugees and IDPs
  • Advocacy through publishing IDP letters
  • Supporting transparency of humanitarian assistance.
  • Publishing poems of IDP and refugee poets.
  • Highlighting International NGO.
  • Summary of interviews with INGO and UN leaders.
  • Congratulations and Condolences for IDP and Refugee families.

5000 copies are printed each week and 4500 of them are distributed for free in 17 IDP and refugee settlements. The remaining 500 copies distributed through market channels.

Retail price of one copy is 950 manats

Anyone interested in cooperating with or subscribing to this newspaper may contact Rafig Farajov, Head Editor of VATAN SASY at the address below.

370146, Baku Matbuat venue 529 Azerbaijan Publishing House. 7th flour. Tel: 39-49-50

Sources used:
Sharg, Radio Free Europe,
Azadlig, Interviews

The SPC was indignant that some papers allegedly linked the resignation of one of its ex-heads with membership in the PNIA while he is non-member of any party. Some Nuriyev's colleagues assert spoke of him as about very careful man and it is difficult to impress him a supporter of any political movement. The fact that since November 29 Nuriyev left his work.


Irrigation works being completed

The rehabilitation works on the irrigation systems located in the two pilot farms Sharur district of Nakhchivan AR and Barda district are being completed in conjunction with the WB financed Pilot Farm Project. The $1.5 million repair work at the Pusian farm in Naxcivan should be finished in March-April 2000; the $924,000 repair work at Gylynjli farm in Berda February 2000. A balance of $700,000 remains for the two projects. The rehabilitation works of drainage systems at the pilot farm Shafag, Salyan district are finished. The rehabilitation of irrigation systems will be completed by late 2001 at the three remaining farms.


Laboratory tests on use of mineral additives for soil improvement conducted by the Institute of Hydraulic Engineering and Land Improvement showed that zeolite from Aydag field is one of the best soil-improvers in hard lands of Ujar region Shirvan steppe and light soils of the Apsheron peninsula. As a result of tests the institute received data confirming that zeolite possesses a specific feature to keep humidity of soil prevent washing away of supplying elements. Besides zeolite contains calcium raising productivity of agricultural cultures. The scientist emphasized it was observed that content of albumen in a grain grown on soil with adding zeolite fertilizers (pure mineral additives) doubled. In addition germinating capacity of seeds as well as stability of plants to diseases improved.

More wheat collected this year

According to Agriculture Ministry, 1078000 tons of wheat were collected by Azeri farms this year including 990000 tons of wheat of the autumn-spring harvest an increase of 67000 tons from the corresponding period of the last year. The grain department of the Agriculture Ministry forecasted a total collection of 1100000 tons of wheat in 1999. This year the wheat was planted on 528000 hectares down 77000 hectares from the 1998 period. Average collection rates were 22100 kilograms per one hectare up 400 kilograms from the last year period. The country's yearly demand in grains exceeds 3 million tons.


Closing down of banks contradicts constitution

A session of the Constitutional Court held on November 19 will examine discrepancy of several items of the Law of Azerbaijan on Banks and Banking Activity to the Constitution. As stated in the Law if a credit institution repeatedly or regularly fails to fulfil the demands set forth in the Law the Board of the National Bank can close the institution. At the same time according to the Constitution the property is untouchable and under protection of state; seizure of property is allowable on through a court decision. The financial position of local banks is worsening and to protect interests of local depositors the High Court stressed the necessity to change several provisions of the Law. The National Bank closed down one bank, Azakbank.

AZERENERZHI did not find means to start repaying EBRD credit

Ministry of Finance reported the repayment of $53240000 credit is disbursed by the European Bank for Reconstruction and Development for reconstruction of Yenikend hydroelectric power station (HEPS) has begun. Total cost of a HEPS project is $72.2 million. Azerenerzhi was to identify the remaining funds itself. Due to delays, the general contractor Azenergostroy was not able to finish work in time. While payments were expected to begin six months after the completion of construction the construction was delayed by three years. The EBRD agreed to reschedule and the credit repayment will be in 11 equal payments over 11 years. Azerenerzhi's hopes to receive $4 million from Russia for power provision of Gabala radiolocation station and use the money to repay the loan. In the meantime, the International bank paid 3.6 million to the EBRD until Azerenerzhi makes it payment.

Ranks of Azeri banks reduce

The National Bank has withdrawn a licence from one more Azeri commercial bank Akadembank. As a result number of credit institutions who licenses have been withdrawn has reached nine this year. The decision to close Akadembank was taken because the bank failed to fulfil NBA's authorized capital norms and obligations before the NBA and clients. According to revision acts it was clarified that as a result of bank's unprofitable activities its capital was inadequate all assets were lost because of bad credit portfolio. Bank's AC by July 1 of the current year made 5.8 billion manats while minimum level in accordance with NBA's demands should have been 6.9 billion. The NBA said apparently Akadembank having convinced of desperate situation it found itself ceased submitting reports to the NBA. Previous warnings and measures to rectify the situation did not meet with success.

New banknotes to be delivered by end of January 2000

The first shipment of new banknotes of national currency in denomination of 1000 and 10000 manats is expected within two next weeks. The country is to import the rest money in small banknotes until the end of January 2000. The contract for printing of 115 million new banknotes was signed with British company De La Rue Ltd. Banknotes in denomination of 50000 manats will not be printed. The renovation process will cover banknotes of 50 100 250 1000 and 10000 manats in the total amount of 700 billion manats. Design of banknotes will remain the same as well as they should conform to old sample. New banknotes are issued instead of ones withdrawn from circulation. Printing of each 1000 banknotes will cost $39.

CLEARING CHAMBER to be established in 2000

Today an expert of the IMF Credit Department Nils Larson is to come in the country to coordinate work of the Committee for Electronic Payment System at Azeri banks Sharg has known at the IMF Baku office that the aim of the visit to last from 1 to 19 of December will be discussion of concrete schedules and terms of implementation of payment system introduction. The NBA Chairman and Committee's Head Elman Rustamov said that the National Payment Council with involvement of commercial banks' representatives would be convoked to discuss the project. Implementation of two project stages is expected in 2000. According to Rustamov under the first stage work with big payments is to be transferred next year to on-line treatment. At the second stage the Clearing Chamber will be formed to carry out small payments. NBA's Head said some options of the Chamber were being considered. It can be a separate body or it will work under authority of AzeriCard joint venture system.

AGROPROMBANK is ready to solve "bad" credits problem

Joint Stock Commercial Bank "Agroprombank" entered into agreement with TACIS regarding the delinquent payment of credits under the RARP-1 program. On the basis of the agreement bank will be receive 10% of all payments to cover service costs. In addition, Agroprombank entered into protocol of intentions with TACIS. This is the first Azeri bank to have started joint introduction of the credit bank scheme with TACIS. TACIS's intent is to issue credits, short, medium and long term through other Azeri banks as well at a fixed rate of 10% per annum. As for the over-due credits of the bank issued for privatized businesses the term of credits repayment has been extended for up to 5 years. According to him a percent of basic part of "bad" credits fall on those organizations though they cannot be named as repaid since those organizations had been allowed a delay. Total outstanding loans are 288 billions manats and if the payments were made immediately these enterprises will go bankrupt according to the bank.


World Bank to disburse additional credit

A SDR 7.4 million ($10 million) Social Investment Fund credit agreement was signed November 7, 1999 between the World Bank and the Azerbaijan government. The credit is an addition to the pilot program of reconstruction of the three districts in Azerbaijan - Fizuli Ter-Ter and Agdam. Attending the signing ceremony were Tevfig Yaprak Resident of the World Bank in Azerbaijan and Ali Hasanov Vice-Premier of Azerbaijan. The additional credit consists of three components - financing of micro-projects support of micro-enterprises and institutional support to the social fund engaged in providing aid to internally displaced persons in Azerbaijan. The social fund will serve as an independent agency of the Cabinet of Ministers to finance rehabilitation of the major social infrastructure and also provide support to small enterprises. The fund also will finance small public works to rehabilitate basic infrastructure development of communes increase of employment rates and strengthening of the government's potential.

AGENT BANK-Tender started. How will the farmers get credit?

The Central Working Body announced tender to specify a bank to implement agent services at the first stage of the project for the pilot farm project. The winner of the tender will be identified by the end of the year. The CWB emphasized that it is the second project financed by the State bank  ($28 million allocated within the framework of the first project covering 1997-2001). Beginning next year, $100 million will be allocated for the development of the agrarian sector. $33,6 million will be used to purchase fertilizer, seeds and etc and will be dispersed to private farms as a short-term credit. The agent will disperse credit in two ways. The first way is via credit unions and the second way is to form farmer groups consisting of 10-20 individuals. The volume of credits to be dispersed to the credit unions will be determined according to their fund policy and the loan size for farmer groups will be $900-1000. The agent will approve the selection of the credit unions and farmer groups by analyzing business plans. Regional information centers would be established to provide information on legislation, modern technology and best practices.

After Peace Agreement WB To Render Help To Azerbaijan &Armenia

During his one-day visit of Washington on November 12 the Prime Minister of Azerbaijan met with World Bank Managing Director. He reiterated the readiness of the WB Group to play a constructive role once a sustainable peace over Nagorno-Karabakh materializes. He further underlined that the WB Group would continue its strong support for economic development and poverty reduction in Azerbaijan. The Prime Minister indicated that a lasting peaceful settlement is a top priority. During the meeting the WB expressed its strong hope for the continuation of the peace process in the Caucasus Region leading to a breakthrough in the Nagorno-Karabakh conflict. He signalled the Bank's willingness to develop a Reconstruction and rehabilitation Strategy as a peace agreement nears. Once a peace agreement is signed the Bank could provide additional IDA resources in both Azerbaijan and Armenia. Financing could be directed to integrating displaced populations and rebuilding the economy. WB President James Wolfenson expressed the similar statements last week in a meeting with Armenian Interior Minister.

Diakonie spins off AKTiMM local NGO

The Azerbaijan Agricultural Information and Extension Center currently in the registration process is the newest member of the local NGO world. The aim of the organization is to strengthen self-sustained agriculture production and consumption and thereby increase living standards of the vulnerable rural population. Special attention will be paid to female IDPs and refugees to improve their skills. AkTiMM has a library facility, which is open to the public with information in Azeri, Russia, English, and German. The outreach to the farmers will be through workshops and seminar and through publication of materials. They can be contacted at 92 21 76 in Baku or in Agcabedi 4 09 66.

AZSPECPROMINVEST Identifying 5 Mountain Regions To IFAD

Consulting company Azspecprominvest completed identifying country's mountain and foothill regions for implementation of International Fund of Agricultural Development's (IFAD) program on the basis of special developed methods Sharg was told by Director for Development Ibragim Mamedzade. Company's management submitted to the IFAD data about various spheres of life's work on the basis of social-economic natural and technical indexes in 32 mountain regions while 13 were recommended. Of them five regions (Gabala Lerik Kedabek Shahbuz and Dashkesan) are chosen for the first stage of the project implementation. The program covers all aspects called agricultural development on World Bank's classification in particular farming plant-growing animal husbandry infrastructure environment protection and other profitable activities. $30 million was disbursed for an IFAD five-year project. $5 million out of them will be spent on development of these five pilot regions. Depending on results of the first stage the rest loan part will be allocated.

KOSIA-SMEDA mini-agencies to be established in 2000

Establishment of Kosia-Smeda mini-agencies that according to schedule of German consulting company GFA-IMC should have been started operating this October was postponed for January 2000 because of appeared problems said project head Stewart Vernon. The delay with project implementation was caused by the fact that Kosia-Smeda has not enough experts. That is why domestic specialists and staff of foreign organizations are drawn temporarily in the work. This January Mr. Vernon emphasized trips to 10 country's regions where new mini-agencies to be launched are expected. GFA-IMC is a performer of a Tacis program in small and medium-sized business (SMB). It became the winner of a tender for the project SMB support in Azerbaijan within a framework of the National Program on Business Support for 1998-'99. Project's cost is ECU 1 million. The Tacis project is designed for transfer of additional know-how in order to Kosia-Smeda agency would restructure programs on business training for SMB representatives. Soon it is to render such services as creation of business analysis and marketing auditor-ship for operating commercial organizations and preparing of business plans for development of new marketing companies.


AZERI CASTEL to improve production next year

Azeri-French beer joint venture Azeri Castel plans to produce 150000-200000 hectolitres (hl) of beer in 2000. The plan begins operating in mid-May (JV's work was halted earlier this March but after at request of the JV management the Cabinet Ministers decreased excise tax from 60% to 15% the plant resumed operation) fell 15,000 hl short of its planned production of 65000 hl of beer. The JV management originally planned to open specialized shops a decision was taken to delay their opening for next year. The JV emphasized the fact that it would be desirable to diminish taxes or apply schedule of customs charges to spare parts of equipment that has been already subjected to customs duties. It was spent over $30 million (77% of JV's authorized capital is stake of the French side 11% - local shareholders 12% - others) on reconstruction of Hyrdalan beer plant. The Plant's capacity is 1 million hl a year. The JV said technology of beer manufactured in Azerbaijan is up with world standards and does not use preservatives. It uses Shollar water and hop (malt is purchased in Czechoslovakia and bottles are supplied from Turkey).

Georgia wants pipeline agreement amended.

Less than three weeks after the signing in Istanbul of legal agreements on the operation of the planned Baku-Ceyhan oil export pipeline, Georgian International Oil Company President Giorgi Chanturia told journalists in Tbilisi on 7 December that Georgia wants those agreements revised, Caucasus Press reported. Chanturia said that Georgia wants changes introduced in the sections of those agreements dealing with the ecological safety of the pipeline and the distribution of responsibility for its operation between the companies using the pipeline and the states across whose territory it runs. He said Georgia specifically considers "unacceptable" an article under which Georgia would bear sole financial responsibility for ecological damage caused by a rupture of the pipeline on its territory.


Problems existed before visa treatment introduction

The Final Protocol of a meeting of the delegations of the Azerbaijan Government and Russia's Federal Frontier Service and State Customs Committee was signed on November 14. The meeting took place at Samur checkpoint. The Azeri delegation was leaded by the First Vice Premier Abbas Abbasov and the Russian one by SCC Deputy Chairman Yury Azarov. Accumulation of more than 300 vehicles with perishables on the Azeri-Russian frontier were behind the talks. The Russian side explained this was due to the Russian Government's Decree banning traffic of vehicles running to Russia from a number of neighbouring countries in particular Iran and Turkey. As for vehicles following from Azerbaijan and Georgia they should be subjected to thorough examination. The Russian delegation members agreed that one must speed up pass of vehicles across the frontier and a special mechanism on implementation of taken decisions was developed.

Foreign investment plummets.

Foreign investment in Russia sank 30.4% during the first nine months of 1999 compared with the same period last year, according to the Russian Statistics Agency. The volume of foreign investment also fell last year but at less than half the rate of this year's decline, Inter-fax reported. Of the total $6.4 billion of foreign investment during the first three quarters of 1999, 48% was direct, 1% was portfolio, and 51% was classified as "other." More than 27% of the total was invested in the city of Moscow, while 15% went to Sakhalin Oblast, 9% to Omsk Oblast and 5.8% to the city of St. Petersburg.

Former secret cities called offshore zones.

Duma deputies voted on 29 November to retain special tax privileges for Russia's 42 closed territorial-administrative entities (ZATOs), which were once called secret cities. Three deputies abstained and 237 voted against a government-backed proposal to abolition ZATOs' tax exemptions, according to ITAR-TASS. Because of the failure of the deputies to approve the government's proposal, First Deputy Prime Minister Viktor Khristenko said the treasury will now lose 200 billion rubles ($7.6 billion) in 2000 and the implementation of the 2000 budget will therefore be jeopardized. According to "Kommersant-Daily" on 30 November, Khristenko believes that tax exemptions for ZATOs have turned them into de facto offshore zones on Russian territory since they are able to offer a wide range of tax breaks to business and industryin some cases as much as 99 percent. According to "Parlamentskaya gazeta," ZATOs have managed to attract in droves those companies involved in oil trading.

Russian Central Bank chief eyes ruble for Belarus within a year.

The date for signing the treaty of the Union of Russia and Belarus will be set during a 3 December meeting of Prime Minister Putin and various cabinet members. It was previously reported from "a source close to the Central Bank," that financial institution is considering introducing a single Russian-Belarusian currency in about six years. According to the source, economic laws and central bank regulations must be harmonized, an interstate agreement on a single currency signed, and all cash in circulation replaced with new cash during that period. The source added that the Russian rouble would likely be the currency for the two countries. The same day, Central Bank Chairman Viktor Gerashchenko told reporters that the rouble should be the new single currency and that a changeover would not take several years but could be accomplished in 12 months.

NGOs to turn to courts?

Russia's non-governmental organizations, many of whom were unable to re-register before the 1 July 1999 deadline stipulated by a 1995 law, have continued working, "although not quite legally, According to the daily, some regional governments views NGOs negatively, particularly human rights organizations, and have used "the most insignificant pretexts to refuse to reregister organizations." The newspaper also reported, without citing any group by name that legal proceedings are inevitable and "will cost the Treasury much more than prolonging" the registration period would have. An amendment extending the deadline to 1 July 2000 passed the State Duma but was rejected by the Federation Council. The Duma can override the decision of the upper legislative body but only with a two-thirds vote.

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