"AZERBAIJAN'S SHARE IN PROFIT OIL WILL REACH 80 PERCENT BY 2008-2009",  SAID CHAIRMAN OF THE NATIONAL BANK OF AZERBAIJAN

 

The perspectives of  the financial sector development in Azerbaijan were discussed on February 20 at the session of Caspian Finance Club within Caspian Integration Business Club (CIBC), with participation of Elman Rustamov, Chairman of Board with the National Bank of Azerbaijan (NBA).

 

Mr. Rustamov stated the importance of a business-government dialog. He said the government is thoroughly monitoring its economic strategy in the country, in particular the non-oil sector. «Each businessman contributes to the state of Azerbaijan, which is business concept as government regards it», Mr. Rustamov outlined.

He provided details on Azerbaijan's financial system, problems in banking activity and perspectives for further development.

Mr Rustamov said that Azerbaijan's economy is most interesting in view of growth dynamics and is in the center of attention of many financial institutions. They are concerned in Azerbaijan's phenomenon and reasons for such a rapid growth of economy, chief banker underlined.

Last year Azerbaijan strengthened its positions worldwide by economic growth dynamics. Over the last three years the country completed a series of large-scale projects. The GDP growth rate in 2006 was 35%, with the oil sector at 62% and the non-oil sector at 12%.

In 2010 the GDP will grow twice as more when compared to 2006, the same as in 2002-2006. In 2010 GDP per capita will amount to $5,000, which is good money.

Over the last three years the overall growth in non-oil sector of Azerbaijan was some 11%. «Many people say oil sector fraction in Azerbaijan's economy is growing at high rates. It is natural, as, according to President Ilham Aliyev, in case oil sector runs high its fraction is bound to grow at the same rate», Rustamov underlined. However, he said, non-oil sector growth rates are high as well, if compared to other countries. For example, China's economy is growing at a rate of 10-11% in the last few years. In Azerbaijan's conditions, rates of the entire non-oil sector seem quite insignificant as remain in shadow of huge oil development.

The state policy is to capitalize oil revenues in the non-oil sphere as much as possible.

Considering another fundamental statement of economy, employment, it is the matter of business to handle it. Rustamov said it is possible that already by the results of four years with State Region Development Program 600,000 new workplaces will open in Azerbaijan, which is one of the primary indicators of a healthy macroeconomic situation in the country.

The head of the National Bank stressed the importance of the country's economic openness. «In this aspect the primary role is given to the external trade balance. It should only be known whom it will benefit - to us as exporters or to the group of countries Azerbaijan is trading with», said chairman of NBA. By the results of 9 months of 2006, according to the balance, external trade surplus of the country amounted to $2bn and at the moment it is $3bn.

The country's trade balance deficiency over the past years was offset by currency coming to Azerbaijan as foreign investments. On the one hand, the government increases its debt, but this debt is of an investment nature, said Rustamov, stressing that investments of $20bn in oil sector will bring big profits to the country in the near future.

Today, by raising oil export, the trade balance is in surplus. «We started repaying the capital balance deficiency so far through repatriation of oil sector investments. In case oil prices keep high in 2008-09 we will complete repatriation of these investments», Rustamov said. Thus, Azerbaijan's share in profit oil will rise to 80%. Azerbaijan's payment balance surplus will increase from current $3bn to $15bn in 2009-2010. Such surplus will be kept through several years.

Azerbaijan's external debt today is $1.9bn, though offset by currency reserves in amount of $4bn.

Speaking of the financial situation, the banker said that the 2006 state budget had grown by 80%, while investments jumped in 4.5 times, of which one-third are governmental investments.

In conditions of people's revenues increase, inflation speed-up is quite habitual, NBA Chairman said. For comparison Rustamov said economic growth in 1996-2003 was 9%, inflation 2.8-3%, and manat-USD rate consolidated by 1%.

«Naturally, in such conditions macroeconomic parameters, like inflation, are formed quite differently», Rustamov underlined. Nevertheless, last year inflation remained one-digit and the population's revenues outpaced inflation in 2.5 times.

Answering CIBC member-companies questions, Rustamov underlined that the financial market of Azerbaijan is open to all foreign banks. «We bid them welcome to Azerbaijan, but they shall comply with certain standards», Rustamov said. In this respect, he went on, actual profit from foreign banks opening in Azerbaijan is being examined. 

Rustamov also said that today's economic situation in Azerbaijan does not inspire creation of an ExImBank with the purpose of Azerbaijan's export support.

«We were the first on South Caucasus to have introduced a new financial tool, mortgage, which has already proved itself in Azerbaijan's market», Rustamov underlined, saying the mortgage envisages voluntary life insurance.

Mr. Telman Aliyev, President and CEO, CIBC stated that two years ago, the Caspian Finance Club involved only local banks, insurance and leasing companies but from early 2007 the Club affiliates financial structures of Kazakhstan, Turkey, Russia, Ukraine, Iran and European countries. He said that one of the primary objectives of the Club is to establish business-government dialog and involve oil revenues to the non-oil sector of the country.

Telman Aliyev provided details on the history of the Caspian Integration Business Club. He said that the CIBC was established in June 2002 by the support of the Caspian Energy International Publishing House and major oil&gas companies operating in Caspian and Black Sea region. Since 2002, the CIBC Honorary Chairman is the President of the Republic of Azerbaijan Ilham Aliyev.

Elman Rustamov answered the numerous questions of CIBC member-companies and was also handed the CIBC Honorary Member Certificate during the session.