Finance

MACROECONOMICS

Inflation hit a record high in Azerbaijan in 2008. However, inflation rate fell sharply in October. Given that inflation was 21.3% in January-September (compared to the same period last year), it was 21.6% in January-October and 21.4% in January-November.

INDUSTRY AND ENERGY

February

Aghjabadi was provided with natural gas.

Azerbaijani President signed a decree on the establishment of an Oil Museum in Baku;

US Kellog Brown & Root won a tender for the Trans-Caspian Project;

March

The groundbreaking ceremony was held for Ganja Steel Complex and Det-Al Aluminum Plant

April

Azerbaijan released information about the military industry for the first time. Minister Yaver Jamal reported to the president at a government meeting about the position of the military industry and the launch of the production of military products;

Construction of hydroelectric power launched in Fizuli region;

Beylagan and Fizuli regions were provided with gas;

May

Opening ceremony was held for Kulevi Oil Terminal which Azerbaijan acquired in Georgia;

Azerbaijan Investment Company, SOCAR, Korean STX Group signed a memorandum on the construction and a shipyard;

June

France’s Total signed an agreement with State Oil Company of Azerbaijan (SOCAR), setting out the main conditions and commercial principles of a exploration, development and production sharing agreement for Absheron offshore oil and gas block.


Baku hosted the 15th International Oil and Gas Exhibition;

Azerbaijan’s Ministry of Defense Industry presented the first military equipment made in the country;

July

The construction of underground gas storage facilities started in Nakhchivan;

The government issued a decision to exempt from VAT and customs duties technological imports for the production of defense-purposed products.

August

Engineering geological work in Umid offshore structure completed;

Azerbaijan couldn’t get 1 billion from oil exports due to the conflict between Georgia and Russia;

September

An International Conference entitled “Oil & Gas Potential of Azerbaijan and Turkmenistan: Energy, Economy, Ecology, Cooperation Strategy” held in Baku

Azerbaijan International Operating Company suspended oil production at West Azeri after halting output at Central Azeri platform due to a gas leak, halving oil extraction from the group of giant Azeri-Chirag-Guneshli Fields.

October

West Azeri platform reopened, Central Azeri is scheduled for reopening in January 2009;

Oil flow via Baku-Supsa resumed;

Turkish TOCA won a tender for the design-engineering work of the Oil Museum that will characterize 160-year legendary oil industry of Azerbaijan.


November

Kazakh oil flowed via Baku-Tbilisi-Ceyhan (BTC). By the end of the year, it is planned to transport about 300 tons of Kazakh oil;

SOCAR and Georgia’s Ministry of Energy signed a memorandum of gas supply to Georgia;

Baku hosted the 4th Energy Summit, bringing together Turkish President Abdullah Gul, Polish President Lech Kaczynski, Ukrainian President Viktor Yushchenko, Lithuanian President Valdas Adamkus, Estonia’s Prime Minister Andrus Ansip, Bulgarian Vice President Angel Marin, Hungarian Prime Minister Ferenc Gyurcsany as well as senior officials from the United States and other countries.

SOCAR and Kazakhstan’s KazMunayGaz signed an agreement on the core principles of establishing Trans-Caspian Oil Transport System.

December

300 MWe power station launched in Sangachal;

Azerbaijan joinedin the OPEC meeting as an observer, and expressed willingness to reduce production as solidarity;

SOCAR took over the management of 29 gas distribution stations in Georgia;

FINANCIAL SECTOR


January

The National Bank of Azerbaijan passed a decision to replace Faig Mamedov, Executive Director of Azerbaijan Mortgage Fund with Fakhri Kazimov;

March

The National Bank moved to the dual-currency basket of the US dollar and euro;

April

The National Bank raised the discount rate to 14% from 13%;

May

World Bank approved $260 million for Water Supply and Sanitation Project in Azerbaijan

June

The National Bank raised the discount rate to 15% from 14%;

The World Bank has approved three projects worth $164 million to clean up Azerbaijan’s Absheron Peninsula, polluted by years of onshore oil production and posing health risks to millions of people who live in the area.


August

The National Bank raised mandatory compulsory reserve requirements to 12% from 10%, and set the compulsory reserve requirements on banks’ external liabilities at 5%;

Azerbaijan became this year’s top reformer, with the most regulatory reforms, according to Doing Business 2009—the sixth in a series of annual reports published by IFC and the World Bank.
The country made a good progress jumping to 33 on the list from 97 last year.

Azerbaijan and the International Finance Corporation signed a memorandum of understanding on Azerbaijan Business Enabling Environment Project;

September

The World Bank Board of Directors extended a USD 25 million loan for Azerbaijan Education Sector Development Project.

October

The National Bank passed a decision to cut the key rates to 12% from 15%, reducing the interest rate ceiling to 17% from 20% and leaving the interest rate floor unchanged to narrow the corridor.
Besides, under the decision, compulsory reserve requirements on banks’ liabilities in national and foreign currencies dropped to 9% from 12% and compulsory reserve requirements on banks’ external liabilities fell to 0% from 5%;

November

Rufat Aslanli replaced Gunduz Mammadov in the post of chairman of the State Committee for Securities;

Asian Development Bank and AzerEnerji agreed on the Power Transmission Enhancement Project in Azerbaijan.

The President of the Asian Development Bank, Mr. Haruhiko Kuroda, arrived in Azerbaijan to attend the seventh Ministerial Conference on Central Asia Regional Economic Cooperation (CAREC) in Baku;

The National Bank passed a decision to cut the key rates to 10%, reducing compulsory reserve requirements on banks’ liabilities in national and foreign currencies to 6% from 9%;

December

The Asian Development Bank (ADB) and the Government of Azerbaijan have signed an additional loan agreement for Ganja Bypass Route Project.

The ADB Board of Directors approved a $160 million loan for the Power Transmission Enhancement Project;


The Government of Azerbaijan and the World Bank has signed an agreement on $300 million additional financing for Azerbaijan Highway 2 Project.


The National bank lowered the discount rate to 8%;


Customs and Revenue System


January

From January 1, Azerbaijan launched a single window for business registration;

April

Azerbaijan detained Russian shipment for a nuclear power plant in Iran;

November

Miles Majlis decided to extend the Law on the Termed Tax Benefits to agricultural producers for another 5 years;

December

Central Customs Hospital opened in Baku;

The State Customs Committee held the presentation of a single window system for checkpoints;

BANKING

February

The National Bank imposed a ban on 9 commercial banks to take deposits after they failed to meet the minimum total capital adequacy;

CitiBank Anonim Shirketi (Turkey) received permission to open representative offices in Azerbaijan;

Commerzbank received permission to open a representative office in Azerbaijan;

July

The state-owned Kapital Bank was privatized.

Licenses of Atlant Bank and Pochtbank revoked;

August

Nahchivanbank Commercial Bank was granted a license;

December

AzFinans Bank was granted a license;

The National bank canceled the licenses of three credit unions;

Insurance sector


March

Gafar Mejidov was appointed as the executive director of the Azerbaijan Insurers Association;

The Law «on Insurance came into force;

April

The Ministry of Finance issued a perpetual license to Kavkaz Sigorta and Azerqarant insurance companies;

July

Baku hosted the first international insurance forum, with support from the Ministry of Finance and Azerbaijan Insurers Association;

The Ministry of Finance issued a perpetual license to Qala Sigorta Insurance Company;

August

The Ministry of Finance issued a perpetual license to Star Alliance, Gunay Anadolu, Azerbaycan Insurance Broking, Aon Azeri Sigorta and Reinsurance Brokerage Company;

September

In connection with numerous regulates, Absheron insurance company’s license was revoked;

Jamil Malikov was elected as the Chairman of the Supervisory Board and Azer Aliyev Deputy Chairman of the Azerbaijan Insurers Association.


November

MBASK and Amrah Sigorta were granted perpetual licenses;

Leasing Sector

June

Elchin Akhmedov (Head of JointLeasing) was elected as the new president of the Azerbaijan Leasing Companies Association.

TRANSPORT SECTOR

January

Azerbaijan and ADB signed a loan agreement for reconstruction of roads Masalli-Astara Part of North-South Highway;

March

The third meeting of the Inter-State Commission and the Coordinating Council on the Baku-Tbilisi-Kars Railway took place;

April

The EU-Azerbaijan Subcommittee on Energy, Transport and Environment met in Baku;

The second Baku Caspian Oil And Gas, Trade And Transportation Conference was held ;

May

Azerbaijan’s Ministry of Transport of and South Korea’s Pyunghwa Engineering Consultants signed a memorandum of understanding to build Shemakhi-Guba Road;

South Korean was awarded a procurement contract under Baku Intelligent Transport Management System Project;

Daewoo was awarded an agreement on the delivery of another 300 buses to Azerbaijan;

June

A loan agreement was signed with BNP Paribas on the highway from Baku-Russian border;

July

Work began on the Baku-Boyuk Kesik railway speed acceleration project;

A ceremony took place for the Turkish section of Baku-Tbilisi-Kars railway line;

August

A opening ceremony took place for a section of Baku-Russian border motorway;

September

The fourth meeting of the Coordinating Council for the construction and repair of the Marabda-Kartsahi section of Baku-Tbilisi-Kars railway project;

An airport opened in Zagatala;

The first part of the road at the intersection of Heydar Aliyev and Zia Bunyadov Avenues opened;

October

Presentation of Baku Intelligent Transport Management System Project held;

An airport opened in Lankaran;

December

TRACECA jubilee summit held in Baku;


Bridge-Tunnel complex at the intersection of Heydar Aliyev, Khatai and Babek Avenues opened;

Heydar Aliyev International Airport-Azizbeyov Circle Highway opened;

Communications

February

The state stake in Azercell Telecom was sold for $180 million.

November

Azerbaijani President signed an order for creating the space industry, and orbiting telecommunications satellites;

BUSINESS

February

Azerbaijan Investment Company (AIC) signed an agreement with the Swiss company Holcim to acquire a 10% equity stake in a cement plant project;

June

Azerbaijan signed a bilateral protocol with Oman and the United Arab Emirates on the Azerbaijan’s membership to the World Trade Organization (WTO);

Azerbaijan Investment Company (25%) and the Islamic Corporation for the Development of the Private Sector (75%) signed an agreement on establishment of a joint investment group, which is called Caspian International Investment Company.


October

Azerbaijan raised its share in to 5% from 2% under a decision made at the BSTDB board meeting in Istanbul.

Azerbaijan’s Deputy Minister for Taxes Shahin Mustafayev replaced Heydar Babayev in the position of Minister of Economic Development of Azerbaijan;

November

In early November, heads of three subordinate bodies under the Ministry of Economic Development - Khalig Mammadov, Executive Director of the National Fund for Entrepreneurship Assistance; Elchin Zeynalov, Chief of the Antimonopoly Service; and Aslan Jafarov Acting Chief of the State Office for the Control of Consumer Market (SOCCM), were fired from their positions.


Agricultural sector

Azerbaijan posted a record high volume of grain production - 2.4 million tons in 2008 for the first time;

The prices of grain and flour hiked earlier this year, but prices fell in September. In October, the price of sugar also declined;

May

Russia’s Baltika Breweries signed a takeover agreement with Brasseries Internationales Holding (Eastern) Ltd. (BIH Eastern) to acquire Baku-Castel Brewery.
Baltika acquired Baku-Castel Brewery wholly and took 92% stake in Baku-Piva Brewery of Azerbaijan

June

Law on Environmentally Clean Agriculture came into effect;

August

Azerbaijan President signed an order on “Additional support for the provision of farmers with seed grain, fertilizers and pedigree livestock;

”State Program for the Reliable Provision of the Population with Food in 2008-2015 approved;

Azer Amiraslanov, Deputy Chairman of parliamentary standing commission on economic policy, appointed as head of agricultural department of the Executive Office of the President;

EXCHANGE

Oil prices plunged to $37.71 on December 29 from $95.2 on January 7, hitting a record $147.27 a barrel reached on July 11.
Oil has tumbled 2.53 times during the year.

Against a backdrop of declining oil prices, the price of gold increased. The official price of gold fell from AZN 722.73 ($855) an ounce on January 7 in Azerbaijan, to AZN 669.80 ($836.7) now. However, despite a 7.3%, decline in gold prices during the year, the highest official rate of gold was reached on March 18 (AZN 847.47 or $1 011.3), and the lowest on November 14 (AZN 577.46 or $713.5). That is, the price of gold has increased by $123 over the past one and a half months;

The exchange rate of the U.S. dollar fell from AZN 0.8453 on January 7 to an annual minimum of AZN 0.8005 now. Thus the dollar declined by 5.3% against the manat during the year. The dollar hit the highest level against the manta (AZN 0.8455) on January 27;

The euro fell from AZN 1.2448 on January 7 to AZN 1.1329 now. The euro declined 9% during the year. At the same time, the euro hit the highest point on March 30 (AZN 1.3240) and the lowest point on November 13 (AZN 1.0093).

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