bne:Invest in Azerbaijan - November 2014

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Content: 2 Top story 4 Corporate statement 5 Interview 7 Feature 8 Sector 10 Economics & finance 14 Chart 15 News in brief www.bne.eu

November 2014

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Azerbaijani official business delegation visits Dushanbe, vows to strengthen ties On October 15, a delegation of Azerbaijani businesspeople headed by Minister of Economy and Industry Shahin Mustafayev visited Dushanbe, the capital of Tajikistan on the occasion of the bilateral Economy and Investment Forum in Dushanbe. The business event was organised by the Intergovernmental Commission on Trade and Economic Cooperation Tajikistan-Azerbaijan.

The forum participants were welcomed by President Emomali Rahmon, whose inaugural speech at the forum and plenary sessions outlined the investment opportunities in Tajikistan. Within the Economy and Investment Forum, a separate Tajikistan- Azerbaijan Business Forum took place. In his address at the latter event, AZPROMO President Rufat Mammadov focused on the investment opportunities available in Azerbaijan, the country's business environment and its export opportunities, of which he invited participants to take full advantage.

Tajik Deputy Minister of Economic Development and Trade Saidrahmon Nazriyev seconded

the head of state in welcoming participants and outlined the investment opportunities in his country. Afterward, the 100-plus Tajik and Azerbaijani businesspeople, representing sectors spanning agriculture, industry, construction, finance, information and communications technology (ICT), energy and healthcare, had the opportunity to introduce themselves, learn more about the business environments in the two countries and to look for business partners.

The Tajikistan-Azerbaijan Intergovernmental Commission on Trade and Economic Cooperation was founded in 2008, and it aims to play an important role in increasing bilateral trade and investment. Azerbaijan and Tajikistan have good diplomatic relations and share cultural, historic and religious bonds, but trade remains modest, at just $11mn in the first half of 2014.

The trade consists primarily of raw materials like aluminum oxide and coke, but the intention is to expand the quantity and types of goods and services exchanged.

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Top story

Malaysia invests big in Azerbaijan and Turkey Malaysia, Turkey and Azerbaijan may be far apart geographically, but commercially they are drawing closer together after two huge investment agreements involving Malaysian state companies.

More such deals are in the works.

pay $285mn for the 40% of equity in Istanbul's Sabiha Gokcen Airport (ISG) that it did not already hold, giving it full ownership and control of Turkey's second biggest airport.

The deals are significant not just for their size Malaysia's national oil company in October paid and strategic importance, but also because they $2.25bn for a 15.5% stake in Azerbaijan's giant are widely expected to be followed by others Shah Deniz gasfield – the field slated to begin as Malaysia's state companies and the state supplying gas to Europe by 2019 – and the South investment fund Khazanah Nasional Berhad, Caucasus gas pipeline (SCP) that currently carries which owns 60% of MAHB, seek to increase their the field's gas as far as Erzurum in eastern investments outside of Southeast Asia.

Turkey.

According to Idzham Abdul Hamit, trade The last half of October then saw Malaysia's state commissioner at the Istanbul office of Malaysian owned Malaysia Airport Holdings Berhad (MAHB) national trade promotion agency Matrade,

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Malaysian companies have a particular interest in exploring opportunities to invest in the still fast growing Turkish and Azerbaijani economies. "Over the past two weeks we have had two Malaysian trade delegations from Turkey, one from the logistics sector and one from the chemical industry sector," he told bne, suggesting that both were looking to capitalise on the recent deals and that both offer significant opportunities for further investments.

Both of the October deals certainly point toward the likelihood to more. It is, however, Petronas' purchase of Statoil's stake in Azerbaijan's Shah Deniz gas field and the SCP pipeline that is exciting most interest, especially as the company simultaneously signed a long-term oil and gas cooperation agreement with Azerbaijan's state oil company Socar.

these form the EU's long-vaunted "Southern Gas Corridor," which designed as an alternative route for Caspian gas exports to enter the EU market rather than cross Russian soil.

Spare capacity To date, neither of TANAP's main sponsors, Socar (70%) and Turkey's Botas (30%), has announced how the spare 15bn cm/y of TANAP's 31bn cm/y capacity will be filled. Socar has said it wants the line to carry gas from other as yet undeeveloped gas fields in its sector of the Caspian.

These include several blocks being developed by BP which has agreed to take 12% of Socar's stake in TANAP, but has yet to sign a formal agreement.

Petronas itself declined to comment to bne on the Shah Deniz purchase, however should BP opt not to join TANAP, that could open the door both Statoil's exit from Shah Deniz came as little for Petronas to take a stake in the pipeline, and to surprise; the Norwegian major last year sold 10% offer gas from the field it has been developing in of it's original 25.5% stake in Shah Deniz to BP Block One of Turkmenistan's sector of the Caspian and Socar, and has been divesting assets as part Sea. Petronas needs to monetize its existing $8bn of a strategy of "portfolio optimization." Petronas' investment in Turkmenistan's offshore Block purchase of the remaining 15.5% of Statoil's stake One," says John Roberts, an independent Caspian gives the Malaysian company the chance to play energy analyst. a major role in the export of the first major gas exports from the Caspian region to European With options for exporting gas from the east markets.

Caspian extremely limited, Roberts explains that it makes sense for Petronas to look to transit the gas Once in operation in 2019, the second phase of the to Azerbaijan. That may well make it amenable to Shah Deniz field is scheduled to export up to 16bn taking a stake in TANAP," he says, adding that cubic metres a year (cm/y) of gas to Turkey via the should Petronas take a stake in TANAP, then it might SCP line and the planned Azeri-Turkish TANAP also make sense later on to take a stake in TAP. line. Of this 16bn cm/y, 6bn cm/y will be sold to Turkey, while the remaining 10bn cm/y will being That too could be possible if Statoil continues its transited through Turkey to Greece via TANAP portfolio rationalisation, and chooses to divest its and then though the Trans Adriatic Pipeline (TAP) 20% stake in TAP – a project in which its continued across the Adriatic to Italy. Together with the participation looks less of a core investment now it SCP line in which Petronas now holds a stake, has exited Shah Deniz.

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Corporate statement PASHA Bank wins World Finance awards for second consecutive year PASHA Bank, one of Azerbaijan’s leading banks, was named The Best Commercial Bank, The Best Banking Group and The Best Private Bank in Azerbaijan in World Finance magazine’s 2014 awards. This is the second consecutive year the bank has received such recognition.

Farid Akhundov, chairman of PASHA Bank, noted that: “In the seven years since PASHA Bank was founded, we have focused on providing banking services at the highest international standards, both in Azerbaijan and later in Georgia. We are honoured that our work has yet again been recognised by such a respected publication, and this highlights the consistent high quality of our products and services. The rate at which our business is expanding year after year is testament to the increasing levels of confidence our customers have in our organisation, both in Azerbaijan and internationally.”

London-based World Finance established these awards in 2007, and uses a combination of an experienced judging panel and readers' insights to identify and designate each year's winners, who hail from over 50 countries. The awards are given to leading institutions and individuals active in finance, law, technology and development for outstanding achievements, and for adopting innovative approaches and best practices in their operations. The award categories for the banking sector are best banking groups, bankers of the year, and best investment, private, commercial, retail and sustainable banks.

PASHA Bank was the only banking group in Azerbaijan and the Caucasus to be recognized in the World Finance awards this year. On their website, World Finance cited the reasons for PASHA Bank's recognition. "PASHA Bank’s commercial banking facilities are comparable even to the region’s leading names in corporate banking… PASHA Bank believes that confidentiality is the single most important factor in fostering a long-lasting relationship between a bank and any one of its many clients.

The firm’s financial and non-financial services are underpinned by impressive local knowledge and extensive connections with leading industry players all around the world."

Domestically, PASHA Bank has continued its efforts to support regional development and financial inclusion. Early in October, the bank was a platinum supporter of the 7th annual gathering organised by the Azerbaijan Micro-Finance Association – an event that drew over 100 delegates from Europe and North America, where they addressed issues like financing solutions for agriculture, energy efficiency and risk management.

On October 22, PASHA Bank held its own business forum on financing and prospects for agricultural development in the northern town of Sheki.

Approximately 50 representatives of small and medium-sized enterprises (SMEs) from the largely agrarian northern provinces of Zagatala, Gabala, Oguz and Sheki attended the event, which aimed at educating participants in the financing options available for their projects. "PASHA Bank is best placed to help agricultural SMEs to grow their businesses. This in turn will contribute to the development of Azerbaijan's non-oil industries, which remains a key focus of PASHA Bank," Taleh Kazimov, the bank's chief investment officer, concluded.

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Interview quarters of 2014 – a trend which CIIC expects to continue. "New legislation was recently introduced to facilitate the financing of the private sector, so this is a good time to put one's trust in non-oil sectors," Aghalarov says.

Other than the energy sector, CIIC avoids investments in conventional finance, gambling, the arms industry, and other sectors that go against the principles of Sharia. Currently, the company only utilizes equity instruments as a form of investment, and going forward may consider investing in Shariacompliant quasi-equity instruments, which are also based on risk and return sharing.

After overhaul, CIIC seeks key role in development of non-oil economy Caspian International Investment Company (CIIC) underwent changes in its management this year, in an effort to refocus the company's strategic direction.

According to General Manager Orkhan Aghalarov, CIIC, which was established in 2008 by the Azerbaijan Investment Company (AIC) and the Islamic Corporation for the Development of the Private Sector (ICD), aims to position itself as an important investor in Azerbaijan's growing non-oil economy. "By investing in the non-oil sectors in Azerbaijan, we are contributing to economic diversification and to the reduction of the country's dependence on energy resources," he tells bne.

Azerbaijan's non-oil economy is gaining momentum, with 6% growth in the first three

Aghalarov says that CIIC's ideal investment scenario is in companies with an internal rate of return that exceeds 20%, and which require investments ranging from $3.2mn to $12.75mn. Other criteria are that, "entrepreneurs have a strong business acumen and a clear understanding of their business, and that they address specific needs in the market that are not met or only partially met."

Prudence and profitability After a lukewarm first six years, the new CIIC is looking to build its portfolio of investments based on three fundamental principles: prudence, profitability and development. "We require adherence to high standards of corporate governance from portfolio companies, as well as envision promoting those standards and establishing industry best practice in Azerbaijan," Aghalarov says.

CIIC's strategy is to maximise deal flows by working together with entrepreneurs and business people, conducting full-fledged due diligence on

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those deals and selecting the most profitable ones. The company takes into consideration proposals from established businesses, but also those with attractive ideas with sound business plans and technical feasibility.

The sources of financing are expected to be as diverse as the company's portfolio. CIIC is looking to leverage its status as an Islamic investment company to attract investors from abroad, especially from the Middle East, who are interested in being involved in Azerbaijan's fast growing economy. So far, the company has attracted $38mn in funding, about 50% of which has been already invested.

full-fledged companies in the next three to five years. Also, "the company is looking to develop the investment sector in Azerbaijan, and to increase awareness of the benefits of having an equity partner. Entrepreneurs in Azerbaijan are generally hesitant to take on shareholders at the moment, and we are noticing a high level of emotional attachment to businesses, which leads to taking extensive debt that harms their growth prospects."

Further down the line, CIIC might resort to an exit strategy like an initial public offering (IPO) on the Baku Stock Exchange, which, Aghalarov hopes, would set the stage for more investors to seek financing in the domestic capital market.

Aghalarov's definition of success for CIIC is that the investments made to date should become

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Feature Central Asia Department, said presenting the report in Almaty on November 4.

Caucasus and Central Asia hit

by Russian slowdown Economic activity in Caucasus and Central Asia (CCA) countries is dwindling largely because of sluggish domestic demand and the slowdown in Russia, which is the region's key trade partner and source of remittances, according to the International Monetary Fund (IMF). Oil producers like Azerbaijan, however, should be able to mitigate some of the effects.

In its Regional Economic Outlook Update for the Middle East and Central Asia, the IMF said that weakening domestic demand and spillovers from the slowdown in Russia would bring economic growth in the region down to 5.5% in 2014 and 2015, 0.75 percentage points lower than projections made in May. "Russia's growth is very close to zero for this year and next year and obviously, Russia's growth rate matters a lot to this region as does China's," Juha Kähkönen, deputy director of the IMF's Middle East and

However, the outlook suggests that the region's oil and gas exporters - Kazakhstan, Azerbaijan, Turkmenistan and Uzbekistan - will be able to reduce the negative effects of Russia's slowdown thanks to "high oil prices, large policy buffers and diversified export markets," but their combined economic growth will still soften to 5.6% in 2014-15 from 6.8% in 2013. "The reduction in oil exporters' growth mainly reflects further delays in the production of the Kashagan oil field in Kazakhstan and weaker domestic demand growth in Azerbaijan," the IMF concludes.

Kähkönen said that the growth projections presented in the outlook update were made in the summer and didn't take account of the falling oil price, noting that forecasts were made on the premise that the average oil price would be $103 per barrel this year and $99 next year.

He also explained that the outlook update did not anticipate a tightening of Western sanctions against Russia over its support for the rebels in eastern Ukraine.

Despite weaker growth and falling food prices, inflation is expected to rise to 6.5% in CCA countries in 2014 and 2015 as a result of the recent devaluations of national currencies, particular in Kazakhstan, the update says. In the CCA oil and gas-exporting countries inflation is expected to increase to 6.5% in 2014 from 6.3% in 2013.

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Sector One area in which Azerbaijan is becoming self-sufficient is construction materials.

Before October 2013, over 60% of construction materials used domestically had to be imported from abroad, primarily from Iran. However, the opening of a new cement plant last year, with a yearly production capacity of 2mn tonnes per year, means that most of the demand for cement, which averages 4.5mn tonnes per year, is now satisfied by the internal production.

In addition to Norm Cement's new plant, there are two other large producers of construction materials in Azerbaijan. Switzerland's Holcim runs a plant in Garabagh with a similar production capacity to Norm's, whereas Akkord, the company entrusted with the expansion of Baku Metro, has its own cement plant in Gazakh, which has an annual capacity of 1mn tonnes.

Azerbaijani construction sector fueled by industrialization, public spending The 20th annual construction fair BakuBuild, which took place between October 22 and 25 in the Azerbaijani capital, attracted a record number of exhibitors and visitors to the Caspian region's largest construction market.

Speaking at the fair, which showcased the products of 490 companies from 29 countries, Minister of Economy and Industry Shahin Mustafayev noted that: "We have witnessed the growth of domestic companies producing highquality and competitive products. There are now a number of construction industry products in which Azerbaijan covers all the domestic needs."

Economic diversification The development of the construction materials industry is welcome news for an economy like Azerbaijan's, in which growth in the oil and gas sector has leveled off, with industry and agriculture becoming the main source of economic growth. This year, non-oil growth is expected to reach 7%, and overall growth 4%. A large part of this growth is supported by public investment in infrastructure and construction, which accounts for over half of the total investment in the economy and for 12.4% of GDP. An October World Bank report forecasts that public spending on construction will continue to rise over the coming years, thanks to scheduled events like the European Games, the European Grand Prix, the Islamic Solidarity Games and the various industrial parks that are under construction.

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Data from the Azerbaijani statistics committee indicates that the construction sector attracted over $15bn in investment and grew by 8.5% on year between January and September.

According to Hasan Yalc覺nkaya, CEO of Norm Cement, there is a fairly equitable distribution of the construction market between residential, infrastructure and non-residential construction.

While the energy sector has not been particularly important in generating demand for the construction market until recently, "now that [state energy company] Socar has designed a big project for a new oil refinery, gas plant, and power plant in Sangachal, there are major opportunities for us even in energy," he said.

Island building In addition to the above, there are ongoing largescale projects, such as the expansion of Baku Metro, which will see the construction of 41 new subway stations over the next 17 years.

There is also the giant Avesta Concern's Khazar Islands project, a $100bn project that consists of a residential complex based on 41 artificial islands in the Caspian Sea. The complex will include the world's tallest skyscraper, the Azerbaijan Tower, which alone is expected to cost up to $2bn to build. It would also comprise of over 150 schools, numerous hospitals, parks, shops, cultural centers, sports facilities, 20 bridges, a 20km boardwalk, and a Formula 1 racing track. The complex will be In addition to the 20 venues that are being built privately funded, and has attracted the interest of investors from the US, Turkey, the Arab countries, or renovated for the European Games next year, which include a main stadium that can sit China and the Czech Republic so far. Construction 65,000, highlights of this year's construction will be completed in four stages, the first of which developments include: 1.5mn square meters of is currently in the works. The tentative deadline for residential construction; schools and hospitals for its completion was pushed back to 2030, from the 25,000 students and 230 beds respectively; a new initial forecast of 2020. In October, Czech company headquarters for the central library in Baku; a new PSJ reached an agreement with Avesta Concern institute for sports medicine in Baku; a new port to build one of the islands and four residential and ferry terminal in Alat, where the Baku port will buildings in a deal estimated at $395mn. eventually move; a solar power plant in Surakhany; While the majority of the construction developments a water storage facility and hydropower plant in the Nakhchivan Autonomous Region; paper, oil in Azerbaijan are still concentrated in the capital, and copper processing plants in the industrial city public investment is contributing to a more equitable of Sumgait, on the outskirts of Baku; a bridge over distribution of construction projects and supporting the Kur river in Shirvan region; a metal casting the industrialisation of the Azerbaijani regions. The plant in Ganja; a stadium and inter-village highway prospects for growth in the construction sector are in Beylegan region; a garment factory and another positive, and industry experts like Rossen Papazov, inter-village highway in Fuzuli region; a sports Director General of Holcim Azerbaijan, anticipate complex in Goy-Gol region; the first stage of a that "many recently started construction projects will be in full flow by 2015, and we aim to contribute ski resort in Gabala region; and a Rixos hotel in to as many of them as possible."

Shamakhi region.

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Economics & finance IMF says Caucasus and Central Asia suffer from Russian slowdown Economic activity in Caucasus and Central Asia (CCA) countries is dwindling largely because of sluggish domestic demand and the slowdown and rising regional tensions affecting Russia, which is the region's key trade partner and source of remittances, according to the International Monetary Fund (IMF). Because of overdependence on Russia, the region's non-oil producers will be hurt most, it believes.

In its Regional Economic Outlook Update published in October, the IMF said that weakening domestic demand and spillovers from the slowdown in Russia would bring economic growth in the CCA region down to 5.5% in 2014 and 2015, 0.75 percentage points lower than projections made in May. "Russia's growth is very close to zero for this year and next year and obviously, Russia's growth rate matters a lot to this region as does China's," Juha Kähkönen, deputy director of the IMF's Middle East and Central Asia Department, said presenting the report in Almaty on November 4. China's economy is still growing fast at more than 7% but it is slowing down, Kähkönen noted.

However, the outlook suggests that the region's oil and gas exporters - Kazakhstan, Azerbaijan, Turkmenistan and Uzbekistan - will be able to reduce the negative effects of Russia's slowdown thanks to "high oil prices, large policy buffers and diversified export markets" but their combined economic growth will still soften to 5.6% in

2014-15 from 6.8% in 2013. "The reduction in oil exporters' growth mainly reflects further delays in the production of the Kashagan oil field in Kazakhstan and weaker domestic demand growth in Azerbaijan," the IMF concludes.

Non-oil growth in oil-exporting countries will decline by about a percentage point to 7.5% in 2014-15 on the back of slower consumer lending, as a result of macro-prudential measures, investor caution because of the devaluation of the tenge and other regional currencies, and increased geopolitical risks surrounding UkraineRussia crisis, it added.

Kähkönen said that the growth projections presented in the outlook update were made in the summer and didn't take account of the falling oil price, noting that forecasts were made on the premise that the average oil price would be $103 per barrel this year and $99 next year. He also explained that the outlook update did not anticipate a tightening of Western sanctions against Russia over its support to rebels in eastern Ukraine.

Azerbaijan a leader in CIS for FDI Azerbaijan is a leader in the Commonwealth of Independent States (CIS) in terms of the volume of foreign direct investment (FDI) it has attracted, most of it going into the oil and gas sector.

In the first nine months of 2014, some $19bn was invested in the Azerbaijani economy, of which $8bn was FDI – ahead of government expectations.

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Chairman of the Sustainable Development Research Centre, Nariman Agayev, told local media: "Currently, the oil and gas sector of the country is still in the focus of foreign investors.

However, the situation will change in the coming years, and the proportion will lean toward the nonoil sector."

accrued interest on loans received during the construction work.

The plants are expected to produce around 3mn tonnes of petrol and nearly 3.6mn tonnes of diesel fuel per year, both meeting the Euro-5 standards.

In addition, the plan is to produce about 1.7mn tonnes of A-1 jet engine fuel. The gas processing The government has been pushing hard to diversify plant would have an annual capacity of 10bn cubic metres. The products are aimed for both export the economy with some success; most of the and domestic use. growth in recent years has come from the nonoil sector, a trend that is expected to continue.

Oil products are now produced by two refineries "Besides the agricultural sector, production of in the capital, Baku, with a total capacity of 20mn building materials and tourism sector would be interesting for foreign investors. It is possible that tonnes per year. The state-owned oil company, SOCAR, owns both refineries. in the future the interests of foreign investors will extend the fields of housing construction and the construction of roads," Agayev added.

Moreover, Azerbaijan has become a net exporter of capital as it increasingly invests in projects of neighbouring countries. In 2012 the republic invested $1.128bn abroad, twice as much as a year earlier.

Agriculture to drive Azerbaijan’s economic diversification

The government of Azerbaijan is pinning its hopes for rapid economic diversification on developing the agricultural sector, which is also one of the Azerbaijan has attracted a total of $83.8bn worth foreign investment from 1995 to 2013, some $35bn biggest employers in the economy. out of which went into the non-oil sector.

As a result of reforms already put in place by President Ilham Aliyev's government, smallholder farmers are producing 80% of all agricultural Azerbaijan to launch two new output, providing jobs to over 40% of the workforce petrochemical plants by 2020 Azerbaijan’s Oil, Gas Processing and Petrochemical Complex (OGPC) will open two new gas processing and petrochemical plants in 2020, AzerNews reported on November 20, citing OGPC’s official Orkhan Jafarov.

According to Jafarov, head of the organisation and control department, the project's feasibility study sets estimated costs at $17.1bn, including

"Building on this sound foundation and in-line with the government's updated agriculture strategy, ‘2014-2020 Development Strategy of Agribusiness in Azerbaijan’, IFAD will be adopting new and innovative approaches to boost rural transformation," the director of International Fund for Agricultural Development (IFAD) Near East, North Africa, Central Asia and Europe Division, Khalida Bouzar, said at a conference in Baku in

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October. IFAD is a specialized UN agency based in Rome.

IFAD invests in rural communities, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, it has provided about $15.8bn in grants and low-interest loans to projects that have reached some 430mn people.

IFAD's partnership with Azerbaijan dates back to 1997. To date, 350,000 rural people have benefited from five IFAD-funded projects and programs.

IFAD's total investment of $67.4mn has leveraged an additional $125mn.

Azerbaijan is already self sufficient in 90% of its meat products needs: poultry meat (81%), eggs (80%), dairy products (75%), vegetable oil (65%), and butter (50%).

As a result of the measures conducted in Azerbaijan to ensure food security, the production of husbandry goods has increased by 3.1 times, cattle-breeding by 3.4 times, meat production by 1.6 times, and grain production by 1.4 times in the past 10 years.

PASHA Bank applies to Turkish authority to buy majority of TAIB Yatirim PASHA Bank has applied to Turkey’s competition authority to acquire a majority stake in TAIB Yatirim Bank from the local Aksoy Holding.

The Competition Board did not disclose the amount of TAIB Bank shares that PASHA wants to buy from Aksoy Holding.

Taleh Kazimov, a board member of the Azerbaijani lender, told a Turkish newspaper in March that PASHA had applied to Turkey’s banking watchdog BDDK to buy TAIB Yatirim Bank.

Turkey’s Aksoy Group had acquired Bahrain-based TAIB's TAIB Yatirim Bank in June 2013. TAIB has been active in Turkey since 1987 and it also has a brokerage firm, TAIB Yatirim Menkul Degerler. TAIB increased its total assets by 250% y/y to TRY59mn (¤21mn) at end-June and its net loss declined by 73% y/y to TRY0.5mn in H1. TAIB Yatirim had TRY56mn in assets as of end-2013 and it reported a net loss of TRY3mn last year. TAIB Yatirim has one branch and employs 30 staff as of end-September.

Pasha Bank is the largest private bank in Azerbaijan by total equity, and one of the top 5 private banks by assets, according to information on the bank’s official website. As of July 1, 2014, the Bank’s assets exceeded AZN986mn (¤990mn).

Azerbaijani banks make combined profit of $248.9mn in Jan-Sep Azerbaijan's commercial banks made a combined profit of AZM317.19mn ($248.9mn) in the first nine months of 2014, according to the country's Central Bank.

A total of 38 banks posted a combined profit of AZM348.52mn ($273.3mn), while six banks incurred losses worth AZM31.33mn ($24.6mn).

According to the Central Bank, the Azerbaijani banking sector's total assets stood at AZM23.5bn ($18.4bn), while the country's banks issued loans worth AZM16.3bn ($12.8bn) and opened deposits

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to the tune of AZM10.1bn ($7.9bn) as at October 1. authorities conducting the inspections. The Ministry of Justice will have to submit a draft of The combined capital of Azerbaijani banks stood the legal measures in compliance with the law at AZM3,792m (nearly $3bn) as at October 1. within three months.

The banking code was first flagged in 2003 as part of the reform of the banking system that came into force on April 1, 2004, but was never developed.

Azerbaijan to develop a banking code Azerbaijan’s Cabinet of Ministers has been ordered to draft a banking code in the next six months as per decree signed by President Ilham Aliev, APA news agency reported on November 5.

The decree states that the code is particularly relevant “taking into account that the credit and banking relations, regulated by a number of laws, are especially important for the entrepreneurial sphere�, reported APA.

The presidential order, containing amendments There are 44 banks in Azerbaijan at the moment, to the Law on Entrepreneurial Activities, also tasks the Cabinet to outline the specific inspecting one state-owned and 43 commercial banks, 22 of which with foreign capital. procedures for entrepreneurs and the executive

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Chart Azerbaijan’s human development In the UN’s latest Human Development Index (HDI) – a summary measure for assessing long-term progress in three basic dimensions of human development: a long and healthy life, access to knowledge and a decent standard of living – Azerbaijan continued to improve its score.

The report released in October showed that Azerbaijan’s HDI value for 2013 stood at 0.747 – which is in the high human development category – positioning the country at 76 out of 187 countries and territories. Between 2000 and 2013, Azerbaijan’s HDI value increased from 0.639 to

0.747, an increase of 17.0% or an average annual increase of about 1.21%.

Belarus with an HDI of 0.786 was the highestranking nation in the Commonwealth of Independent States, sitting 53rd out of 187 countries. Belarus now sits three places above Russia, which has an HDI of 0.779.

Azerbaijan’s 2013 HDI of 0.747 is above the average of 0.735 for countries in the high human development group and above the average of 0.738 for countries in Europe and Central Asia.

Trends in Azerbaijan’s HDI component indices 2000-2013

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News in brief Prices of agricultural products up by 2.6% in Azerbaijan in October In October producers’ prices of agricultural products increased by 2.6% compared to the previous month, according to data released by Azerbaijan’s State Statistical Committee on November 6.

Agriculture is the main focus and most important sector for the government's diversification programme and has been making good progress on the back of heavy investment into supporting infrastructure and improved access to finance for farmers.

Azerbaijani Agriculture Minister Heydar Asadov said the total volume of production of agricultural goods increased by 3.4 times in Azerbaijan over the past ten years in an article published in the The committee recorded an increase in producers’ official press on November 1. prices of annual crops and perennial crops correspondingly by 3.0% and 3.1% and producers’ prices of live cattle and livestock products by 2.2%. Among the perennial crops prices for Azerbaijani exports to Russia pomegranate, a key crop for Azerbaijan, increased to top $1bn in 2014 by 20.5% while a 12.5% increase the price of pumpkin is the highest among annual crops.

Trade is flourishing between Azerbaijan and trade turnover between the two countries is expected The increase confirms the upward trend of the to top $1bn this year, according to Azerbaijani prices of agricultural products – in August the Economy and Industry Deputy Minister Sahil price of hey increased by 2.3% and by 2.1% in Babayev.

September.

"Today Azerbaijan and Russia signed more than 170 bilateral agreements, over 45 of which were on the economic cooperation, and the signing Azerbaijan agricultural output of the agreement on mutual protection and promotion of investments in September 2014 soars thanks to Russian food shows how high and strong the level of economic sanctions relations are between two sides," Babayev said during an Azerbaijani-Russian business forum Azerbaijan agricultural output was up by a third held in Baku on October 16, reports Azernews.

(34.3%) in the first nine months of this year thanks to rocketing demand for fruits and vegetable by There are about 570 companies with Russian Russia, which has banned imports of the same capital in the country. In total, Russia invested from the EU, according to the government. about $1.8bn in Azerbaijan's economy.

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Azerbaijan to build new power plant in capital The state-owned electricity producer Azerenergy says it will start construction of a second combined cycle power plant at the Shimal power plant at the beginning of next year to augment the power supply of the Absheron peninsula.

The Shimal power plant currently meets around 25% of Baku and Absheron's power needs. The figure will reach 35-40% as soon as the second unit is commissioned. The Shimal power plant currently consists of one combined cycle power plant with the capacity of 400 megawatts (MW).

The capacity of Azerbaijan's total power supply system has increased by 40% over the last ten years and hit 7,100MW, which allows to export some 2,300 megawatts of the electricity. zerbaijan's total electric generation capacity is currently based on 14 thermal and 10 hydro power plants, which produce a combined 7,100MW. Production of power has risen by 40% over the last decade and Azerbaijan exports some 2,300MW to its neighbours.

The company is a leading developer of precious metals resources in the Caucasus and has says it wants to expand production in all areas.

Silver production for the third quarter totalled 5,504 ounces, down from the second quarter's 8,785 ounces of silver. Copper production for the period totalled 210 tons.

Overall, Anglo Asian's production in the nine months of the year reached 43,232 ounces of gold, 27,419 ounces of silver and 580 tons of copper.

Azerbaijan to build new airport Azerbaijan is continuing its investment into transport logistics and plans to build new airport in Alat settlement, PR office of the State Committee for Urban Planning and Architecture said.

Construction is due to start in the near future and will ease pressure on passenger and cargo transportation in the capital.

The new unit is being constructed by Japan's Toyo Engineering Corporation and has a planned capacity of 409MW.

Currently, there are six international airports operating in Azerbaijan, including the Heydar Aliyev International Airport in Baku and the airports in Nakhchivan, Ganja, Lankaran, Zagatala and Gabala.

AAM gold mine puts in solid quarter

Azerbaijan ahead of Europe in natural population growth

Gold miner Anglo Asian Mining plc put in a solid quarter that saw gold production in Azerbaijan up by 2.8% to to 16,178 ounces from 15,736 ounces produced in the second quarter.

Demographic declines are plaguing the countries of both Western and Eastern Europe, but not in Azerbaijan where the population is young and growing.

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The population of Azerbaijan has increased by 75,400 people, or about 0.8%, reaching 9.552mn people since early 2014, according to the State Statistics Committee, ahead of Europe where the population rate in almost all countries remains below the replacement rate.

Baku metro to get new tunnel

Based on statistics for the first eight months of 2014, a total of 112,000 children were born in Azerbaijan, 53.6% of them were boys and 46.4%, girls. During the given period, there were registered 37,300 deaths.

The Baku subway's red ("Hazi Aslanov" "Icherisheher") and green lines ("Darnagul" "Khatai") intersect at the "28 May" station and separation of the two lines with a new tunnel will improve speed and safety for the metro.

The state-owned Baku Metro company signed off on a deal with France's Bouygues Travaux Publics to build a new tunnel from the "28 May" station in Azerbaijan.

The working-age population is also growing. Since The project will be launched in near future and is slated for completion in 2016. this group not only consume but also produce goods, it produces more national income, which also creates favourable conditions for GDP growth. Baku Metro has two lines and 23 stations but planned expansion will add another 119km with five lines and up to 76 stations by 2030. Eight The population density in Azerbaijan is 110 stations and two train depots are already under people per square kilometre. The ratio is 1,000 construction. men to 1,011 women. The share of urban-rural population is 53.2%- 46.8%.

Ganja plant produces over 1,000 tractors

Azerbaijan promotes business with preferential loans Some 34 Azerbaijani companies in Baku have received preferential loans worth AZN1.8mn in the first nine months of 2014.

The Ganja Automobile Plant, the leading automotive facility in Azerbaijan, produced 1,009 tractors assembled under licence from a Belarus model in the first ten months of this year, 536 units Since the start of the year, the National Fund for Enterprise Support (NFES) under the Economy more compared with the same period in 2013. and Industry Ministry, has given a total of 4545 loans worth AZN245.8mn that are expected to The plant also produced 202 unit of the giant create more than 4,300 new jobs.

Belarusian MAZ dumper truck model, up from 184 in the same period a year earlier.

In 2014, the National Fund plans to issue Currently, Ganja Automobile Plant is assembling loans worth AZN280mn, including AZN130mn coming from the repayments and the remaining 6-7 tractors, 3 MAZ automobiles and other AZN150mn coming from the state budget. machineries per day.

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