Dec 26,2012

Baku – APA-Economics. Condition of Azerbaijan’s economy in 2012 can not be valued unambiguously.

 
Positive factors, observed during the reporting period, include high growth rate in non-oil sector and low level inflation. According to outcomes of 11 months of 2012, the economic growth in oil sector made 9.7%, up 0.2 percentage points from previous year. Annual inflation stood at 1.2%, down 6.7 times from 2011. At the same time, as a negative factor, we could note 6.5%-lagging in oil sector. This was caused by decline of oil extraction. So, annual volume of oil produced in January-November dropped 6.8%. Consequently, economic growth made 1.2%, down forecast data, while up 6 times from 2011. So, the forecasts of government and international financial organizations on GDP growth are 2-2.5%.
 
Besides, as a positive macro economic results it must be noted remaining of manat stable against dollar in 2012. Even, the manat strengthened 0.2% in early 2012. CB continued manat sterilization policy top prevent strengthening of manat and currency sterilization made $978 mln. Consequently, CB provided balancing of supply and demand in currency market.
 
 
Economic chronicle:
 
 
February
 
The State Oil Company of Azerbaijan realized first corporate bond emission. The volume of the issue made $ 500 mln, annual profitability – 5.45%, turnover period – 5 years. The main purpose of emission was involvement of funds for financing of capital investment.
 
The governments of Serbia and Azerbaijan signed agreement on allocation of 300 mln euros by Azerbaijani side for construction of Corridor-11 section of Lig-Prelina road. The loan was provided for 15 years with a 3-year beneficial period at a fixed rate of 4% annually. Azerbaijani and Serbian companies are constructing the road together.
 
 
 
March
Chairman of Supervisory Board of Technique Bank and one of the mains shareholders of the bank Etibar Aliyev was arrested. It was found out that financial indicators of the bank were sharply low. New management was appointed in mid of this year. The bank changed its brand. Currently measures are taking in direction of bank’s sanation.
 
Baku hosted World Bank’s 2nd economic policy forum. The agenda of the forum included development of economy, its diversification, improvement of business climate, labor market, high education and etc.
 
 
April
 
Moody's Investors Service upgraded Azerbaijan's foreign- and local-currency government issuer ratings by one notch to Baa3 from Ba1. Consequently, Azerbaijan passed from IX group to VIII group. Besides, the country passed from VIII group to VII on economic risks. It changed IX group for VIII on sectoral risks. This evaluation reflects the level of risks that a bank may face in each country.
 
Azguntech plant was opened in Sumgayit. The plant would operate two production lines – for solar modules and LED lamps. The construction of the line producing solar modules, based on advanced technologies of leading European companies, began in January last year. It is fully ready for operation now. The panels ranging from 42 to 250 watts, equipped with 60 solar cells, will be manufactured at the level of international standards and produce energy. For more efficient lighting and better energy supply of residential buildings, streets, squares, various catering and social facilities, the plant also intends to manufacture high-tech LED lamps.
 
 
May
 
Standard & Poor's Ratings Services said that it had revised its Banking Industry Country Risk Assessment (BICRA) on Azerbaijan (BBB-/Stable/A-3) to group '8' from group '9'. The economic risk score was revised to '7' from '8' and the industry risk score to '8' from '9'.
 
For the first time in Azerbaijan, Azercell Co. started the application of 4G technology. Fourth Generation (4G) mobile technology is a set of standards for providing broadband Internet access to devices like cellphones and tablets. In Azerbaijan, only some phones support 4G.
 
 
June
 
Azerbaijan and Turkey signed agreement on TANAP project in Istanbul. Realization of TransAnatolian pipeline project will cost $7 bn. The diameter of the pipeline has been considered at 56 inches or 1.4 meters. The project will be implemented in 4 stages. Annual capacity of the pipe will make 16 bn cbm. In this project, Azerbaijan owns 51%, Turkey – 20%, foreign members of Shah Deniz consortium – 29%.
 
Azerbaijan started the returning of lump sum payments of USSR-period banking savings. The process that will cover more than 2 mln savers will be lasted by the end of 2013. Funds for repayment are near AZN 1 bn. As of December 1, 2012, AZN 481 mln have already returned to savers.
 
Azerbaijani Parliament ratified the Code of Town-Building and Construction. The main novelty of the Code is systematization of permits for construction and town-building activity on concrete principles, making the processes transparent, increase the role of society here. The Code considers new demands on quality of construction materials and professionalism of the staff engaged in construction process. The Code mainly will come into force from the beginning of 2013, but some articles will come into force in 2016.
 
July
 
License of Royal Bank OJSC has been cancelled under the decision of CBA’s Board of Chairmen. According to information, the deletion was related to that the bank didn’t meet several requirements. ‘As minimum amount of total capital and its adequate do not meet the requirements, as the bank can not fulfill its obligations in front of creditors and as its current activity is not realized reliably and prudentially, as well as it did not fulfilled written tasks of the CBA’, told the information. Azerbaijan Deposit Insurance Fund realized payment procedure of compensations to savers, whose deposits were kept at Royal Bank.
 
Azerbaijan Airlines purchased the second Boeing 767-300ER aircraft. Consequently, the total number of passenger planes of AZAL hit 22. Moreover, AZAL started the implementation of direct flight on Baku-Tabriz route. The flights are operated twice a week.
 
New cement plant of Holcim-Azerbaijan OJSC was opened in Garadagh district of Baku. This plant will be the starting point in cement industry of the South Caucasus. The dry-process cement production technology is widespread in Europe from viewpoint of fuel consumption and environmental impact. €300,000.000-project will contribute to development of construction sector.
 
August
 
Under the decision of the Central Bank of Azerbaijan, minimum requirement for total capital of the banks was increased from AZN 10 mln to AZN 50 mln. The banks must reach the new minimum by January 1, 2014.
 
September
 
Within the framework of application of investment instruments, State Oil Fund of Azerbaijan purchased 10 tons of gold. At present, that gold is kept at London banks and preparations are carried out in direction of bringing it to Azerbaijan. The gold will be kept at special storehouses of the CBA.
 
 
 
October
For the first time in 20 years, Azerbaijan openly expressed its dissatisfaction about BP’s activity. During the meeting of the Cabinet of Ministers, Azerbaijan’s President Ilham Aliyev declared that unexpected recession in oil extraction was caused by the gross mistakes of BP that is leading the consortium on Azeri, Chirag fields. He condemned the company in $8.1 billion-Azerbaijan’s missed profit. But the partners did not let the matter to blow up – BP’s Baku office changed the leadership, leading experts of the company were immediately sent to Baku and they prepared a program for stabilization of extraction in a short time. Consequently, in December, President Aliyev said that unpleasant inclinations between Azerbaijan and BP were ended and the partnership was being continued successfully.
 
November
 
Azerbaijan’s President Ilham Aliyev issued a decree on establishment of High Technologies Park. Under the decree, High Technologies Park will be established in Sumgayit city, with the view of ensuring sustainable economic development, increasing competitiveness, enhancing information and communication technologies based on modern scientific and technological achievements, conducting scientific studies and establishing modern complexes on the development of new information technologies.
High Technologies Park will have infrastructure, material-technical basis and management structures necessary for conducting studies in information and communication technologies, telecommunication, space, energy efficiency, developing new and high technologies.
 
VII Internet Governance Forum was held in Baku. The Forum brought together more than 1500 delegations from the state and international organizations, private sector, civil society, Internet enthusiasts. The main issue on the agenda was ‘Internet Governance for Sustainable Human, Economic and Social Development’.
 
December
 
President Ilham Aliyev approved the state budget for 2013. The state budget revenues in 2013 will amount to AZN 19.159 billion and expenses AZN 19.850 billion. In annual comparison the revenues were increased by 12.4%, expenses – 12.1%.
 
The Central Bank of Azerbaijan reduced accounting rate to 5% from 5.25%. This step was taken to allow decreasing of interest rate more, by taking into consideration that the inflation is at an optimal level, and support economic growth in non-oil sector.
 
The State Oil Fund of Azerbaijan (SOFAZ) acquired €135 million property (offers office, retail and residential space) at 8 Place Vendôme in Paris. An office complex in London’s West End on 78 St James’s Street for £177 350 000 is also belongs to the company.
 
The Parliament approved some amendments in Tax Code. Some of them are considered as a step directed to liberalization of tax policy and reduction of tax burden. According to amendments, maximum rate of income tax from individuals was reduced to 25% from 30%, sum of monthly incomes, on which minimum rate was 14%, rose AZN 2,500 from AZN 2,000. Fee-paying educational institutions have been freed from VAT. Moreover, Rules on disposition of tax authorities on bank accounts of taxpayers, having tax debt, have been soften in the country.
 
Balakhani plants for burning and sorting of solid waste were opened. Balakhani plant for burning of solid waste is the first of its kind in the East Europe and CIS. Projection and construction of the plant was realized by French Cnim Co. The foundation stone for the facility was laid on November 3, 2009. The plant capacity is 500,000 tons per year. It will generate 231,500 megawatt of electricity from incineration of the household waste.
 
AgustaWestland has signed a contract valued at approximately EUR 115 million with Azerbaijan Airlines to supply ten helicopters (eight AW139s and two AW189s). These helicopters will be used to perform a range of mission including offshore transport, emergency medical service, search and rescue and VIP transport.
 
Azerbaijan has started the establishment of large farmer economies in accordance with the food security program. 4,800 ha of area in Beylagan and Agjabadi regions were determined for winter quarters. Total investment cost of the project makes AZN 27.6 mln. In future, the number of such economies will be reached up to 40-50.