Major foreign investors should participate in privatization, expert says

By Aynur Karimova

Azerbaijan, which has opted for taking anti-crisis measures, should involve major foreign investors in the privatization process, Ibrahim Mammadzade, the Managing Director of the ASPI Consulting Engineers Company, believes.

He told Trend that today, not every Azerbaijani company is able to provide the necessary capital for privatization.

"The experience of previous stages of privatization in Azerbaijan has shown that improvement of the infrastructure requires not only foreign investors, but also foreign operators," he said.

Recently, President Ilham Aliyev has noted the need to prepare a broad program of privatization, attracting both foreign and local investors, to improve the business environment and accelerate business revival in Azerbaijan.

Azerbaijan has earned a huge amount of funds as a result of the oil boom, which was enough to start the privatization process in the municipal sector.

Mammadzade believes that after the second devaluation of the manat the privatization of these facilities will be much more complex than a few years ago.

"There is no private local operator, which would provide high-quality services for electricity, heating, water and gas supplies, utilization of household waste, as well as in the field of road maintenance," he noted. "I'm not talking about the investments in support of infrastructure, requiring huge expenditures. We do not have local private sector willing to invest $3-4 billion in providing infrastructure services. With regard to strengthening the economy, public-private financing and management of the infrastructure sector seems promising."

It is also necessary to carry out reforms in the field of legislation and to create a regulatory framework in Azerbaijan, Mammadzade believes.

He advised to revise the legislation and regulatory base to improve international trading and purchasing rules, control mechanisms, contract signing procedures, as well as monitoring and evaluating of investments. "Then there will be a chance to attract foreign investors in the privatization process in the country despite the commercial risks," he added.

The government has passed two stages of privatization so far and it would be better to fix the drawbacks in these processes to avoid further mistakes.

The first stage of privatization began in 1995, and mainly covered small enterprises. The second stage launched in the early 2000s and included medium-sized enterprises.

"At this stage it is necessary to outline the most attractive enterprises and privatize them taking into account the amendments to the legislation and regulatory framework, stable oil prices and exchange rate stability and their actual market price. I should note that one of these enterprises is the Baku-Heydar Aliyev International Airport highway, the sea port in the Alat settlement, Shimal power plant and a waste recycling plant in Balakhani," Mammadzade concluded.

The new privatization program is expected to be implemented transparently with participation of international experts. Moreover, favorable conditions will be created for local and foreign businessmen to support their interest in investing into Azerbaijan’s economy.

The process of privatization is not the guarantee of the economic revival, but it strengthens the competitiveness of economy, well representing a combination of private and public ownership.

Finance Minister Samir Sharifov recently said that Azerbaijan expects to receive some 100 million manats ($61.35 million) from the privatization of state property this year.

Last year some 685 small state enterprises, unfinished buildings, vehicles, 456 plots of land, and 20 joint-stock companies were privatized in the country.

Member of Parliament Rufat Guliyev believes that there are still a sufficient number of businesses that are entirely on the state balance sheet, as well as enterprises that have been partially privatized.

“There are more than 600 joint-stock companies, which have been partially privatized in Azerbaijan. The state share in these companies sometimes reach 30 percent. If these enterprises are privatized with direct international investment, it will bring a large inflow of foreign currency in Azerbaijan. In addition, this will entail the influx of foreign technologies, create new jobs and expand the tax base,” he said earlier.


Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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