SOFAZ funds equal half of Azerbaijan's GDP

By Gulgiz Dadashova

The volume of funds held in the state oil fund SOFAZ -- an entity that accumulates and manages Azerbaijan's oil and gas revenues -- is currently equal to half of the country's gross domestic product, SOFAZ head Shahmar Movsumov told a meeting of the World Economic Forum (Davos Forum) in Baku on Monday.

In early March, the State Statistics Committee reported that Azerbaijan's GDP increased by 3.2 percent in January-February compared to the same period of last year and hit 8.344 billion manats (nearly $10.63 billion).

According to Movsumov, the funds accumulated in the state oil fund are mainly invested outside the country and mostly directed to infrastructure projects.

"Economic strategy of the country's leadership is directed to investing in infrastructure projects," he said.

Earlier SOFAZ cited an opportunity to buy property in Turkey, Singapore, Indonesia and Malaysia.

At this stage, the fund is considering options of purchasing office real estate with the main goal to get revenues from property lease.

SOFAZ has already purchased the $133 million Gallery Actor, a mixed-use office and retail complex located on Pushkin Square in Moscow, as well as an office complex in London's West End for £177.35 million and a €135 million property in Paris.

The projected total average cost of SOFAZ's investment portfolio for 2013 was set at 25.2 billion manats ($32.1 billion), while as of late 2012 it was projected at 23 billion manats (nearly $29.3 billion).

According to SOFAZ's investment strategy, up to five percent of the investment portfolio may be placed in stocks, up to five percent in real estate and five percent in gold.

Movsumov said that Azerbaijan achieved great success in the economy in a short period of time, citing improved road infrastructure; the country has turned from a power importer into a power exporter, built roads, schools, modernized and expanded the sanitation and water supply systems.

Among the major projects which will be financed this year through SOFAZ, Movsumov referred to the project on the development of broadband Internet in Azerbaijan, which will create opportunities for the private sector.

In February, it was reported that SOFAZ allocated around 103 million manats ($131 million) to implement a project on developing broadband Internet based on the "Fiber to Home" model in Azerbaijan.

The main goal of the project is to provide remote regions of the country with broadband Internet (at a speed of 10 to 100 Mbit/s) and expand the number of Web users to 85 percent. Thus, according to this index, Azerbaijan will reach the level of developed countries by 2015.

SOFAZ, a sovereign wealth fund, was established in December 1999 by a presidential decree. Its primary objectives are to help maintain macroeconomic stability in the country and to generate wealth for present and future generations.

The assets of SOFAZ as of January 1, 2013 had grown by 14.5 percent compared to early 2012 and stood at $34.129 billion.