Azernews.Az

By Seymur Aliyev Azernews Staff Writer

Azerbaijan has significantly increased its capital investments abroad, the Ministry of Economic Development told AzerNews on Monday.

"Both state-run and private companies of Azerbaijan have significantly improved capital investing abroad," the ministry said.

According to a United Nations Conference on Trade and Development (UNCTAD) report, Azerbaijan's direct investments abroad in 2011 totaled $533 million, significantly up from $232 million in 2010.

The fast-growing South Caucasus republic has now entered a new stage of economic development and is competitive in comparison with European countries.

After successfully attracting foreign investments and proving to be a country with a stable economy Azerbaijan began to act as an investor and now has a large sphere of activity, with a promising future lying ahead.

"Now Azerbaijan is recognized as a potential investor among regional and world countries and the countries interested in the Azerbaijani capital are increasing in number," the ministry added.

Most investments from Azerbaijan's capital portfolio have been made in Turkey, Georgia, Russia, Uzbekistan, Ukraine, Romania and Switzerland.

The ministry noted that there are 844 companies in Turkey operating with Azerbaijani capital. These companies are mainly engaged in construction, tourism, real estate, energy and transport sectors. The state oil company SOCAR and other Azerbaijani companies have invested about $4.5 billion in the Turkish economy. SOCAR plans to invest $17 billion in Turkey until 2018.

In the last five years Azerbaijan has invested $700 million in the economy of Georgia. In 2011 SOCAR, investing $32 million in Georgia, became the largest investor company in the neighboring South Caucasus republic.

According to the ministry, rampant development of Azerbaijan's economy has resulted in increased financial resources and provides opportunities to invest abroad. Due to paying much attention to boosting the private sector in the country, entrepreneurship has rapidly grown, and excellent social and economic results pave the way for investments not only in the domestic economy but also in other countries. The main target of the resource-rich country is to develop its non-oil sector on account of oil revenues by investing both domestically and abroad.

"Every year Azerbaijan and other countries host a lot of promotional events, business forums, meetings and exhibitions, in order to discuss priorities in fostering an impetus for mutual investments," the ministry noted. "Such events create suitable conditions for new cooperation between Azerbaijan and foreign companies."

Azerbaijan managed to create the image of a stable country where the funds of foreign investors are encouraged and protected by the state. Azerbaijan was declared the top reformer on improving the business climate in the Doing Business 2009 report released by the World Bank and the International Finance Corporation, the WB's private-sector lender. The country retained its position in the Doing Business 2010 report, implementing measures aiming to further improve the business environment, which were assessed as positive. Azerbaijan was upgraded by 18 points and ranked 51st among 133 countries and led the way among CIS countries in the World Economic Forum's (WEF) Global Competitiveness Report issued for 2009-2010.

Azerbaijani President Ilham Aliyev, addressing the opening of a Swiss cement plant in the Garadagh district outside Baku in July, said that over the past 17 years $120 billion has been invested in Azerbaijan. This year, Azerbaijan expects investments in its economy totaling about $18 billion, he said. It is a great index for the country.

At the same time, Azerbaijan is capitalizing on its potential and is also turning into an investor country.

One of the biggest Azerbaijani companies investing abroad is the state oil company SOCAR. With its vast potential, SOCAR has become a major investor in other countries. For example, SOCAR will invest 258 million euros ($319 million) in the construction of a resort in Montenegro, according to the website of the country's Council for Privatization and Capital Projects. An agreement on long-term lease of the facility, which is located in a former military site, 116 kilometers (72 miles) southwest of Montenegro's capital Podgorica, will be signed with SOCAR for 90 years. SOCAR is expected to invest 52 million euros into the resort's development during the first four years of the lease, or 258 million euros in total during the first eight-year period of the lease.

SOCAR also intends to develop the business of Azerbaijani travel agencies in Europe. A number of travel agencies have sought to enter European markets, but as yet to no avail. SOCAR has undertaken this initiative, and is assisting these companies in the organizational and legal issues so that they could enter the European tourism market, SOCAR President Rovnag Abdullayev said, without citing the travel agencies.

SOCAR aims to invest in projects implemented in all regional and European countries. But the country where SOCAR invests most of all is Turkey. SOCAR Turkey Energy head and Petkim petrochemical complex board member, Kenan Yavuz, said about $9 billion will be invested in the development of a site designated for the construction of a refinery, a power station worth $1 billion and a container port worth $300 million. The rest of the investments will account for the TANAP gas project designed to build a pipeline from eastern Turkey to its European Union border. At present preparations are underway to start the refinery construction. By 2018, SOCAR's investments in Turkey will reach $17 billion.

Among other foreign operations of SOCAR is investment in the energy industry of Switzerland. The company is also involved in the implementation of the Azerbaijan-Georgia-Romania Interconnector (AGRI) gas project in Romanian territory, and in developing the fuel infrastructure of Greece, Ukraine and Moldova.

Moreover, SOCAR's activity in the construction of refineries will not be limited to Azerbaijan. The company is interested in placing funds abroad, which, in particular, can be invested in the construction of oil refineries in Kyrgyzstan, Tajikistan, Georgia, Ukraine, and even in Latin America.

Another major actor investing oil revenues is the Azerbaijani state oil fund SOFAZ. The total investment portfolio of SOFAZ is forecast at 23 billion manats (around $29.3 billion) this year.

SOFAZ is now eying real estate in several European countries and south-east Asia for investment, executive director of the Fund, Shahmar Movsumov, said at a recent press conference.

"In particular, we are considering properties in London, Paris, Rome, Moscow, Istanbul, as well as in Singapore, Malaysia and Indonesia," Movsumov said.

On the issue of investing in shares, Movsumov said that given the risks associated with significant changes in prices currently observed in global financial markets and stock markets, SOFAZ plans its first investment in shares in September this year. The volume of investments in stock is projected at $600 million. It is also planned to invest $400-500 million in short-term deposits in Russian rubles.

Some 85 percent of the oil fund's investment portfolio in 2012 will be formed by money market instruments and the debt market. It is envisaged in the fund's 2012 investment policy, approved by the president of Azerbaijan. Up to five percent of the investment portfolio may be invested in shares, another five percent -- in real estate, and five more percent in gold. Real estate and gold are new directions for SOFAZ investments this year.

The main purposes of SOFAZ are to accumulate funds and place assets abroad to minimize the negative impact on the Azerbaijani economy, preventing "Dutch disease", to ensure savings for future generations and maintain the current living standards in the country.

Azerbaijan invests abroad not only on account of its oil revenues. Many non-oil sectors of the economy try to make investments as well. For example, a five-star hotel will be built in neighboring Georgia with Azerbaijani investment. Construction of the "London" hotel was officially launched on July 26. The new hotel will be built with investments of the Nakhchivan Autonomous Republic. The construction work is carried out by the Azerbaijani company Gemi Gaya. Azerbaijani investors have allocated $10 million for the construction of the hotel.

These are just the first steps of Azerbaijan in foreign investment, but these steps indicate that Azerbaijan will soon be a major investor in the region and also in the entire Europe.