By Aynur Jafarova
The Black Sea Trade and Development Bank (BSTDB) will allocate a $58 million loan for Azerbaijan's state energy company SOCAR -- the largest loan in its history, BSTDB Chairman Andrei Kondakov said.
"The Board of Directors has unanimously approved the decision on BSTDB's joining the (Turkey-based) Star refinery construction project," Kondakov said. "The loan will be allocated for a period of up to 18 years. The exact term is still being discussed."
According to Kondakov, the bank usually disburses loans for up to 10 years. The loans of such an amount are generally provided under sovereign guarantees.
"In this case, such guarantees are not required, as we consider SOCAR as a very serious and reliable partner," he said.
Baku hosted the 15th Annual Meeting of the BSTDB Board of Governors on June 20-23.
Lending to financial institutions
BSTDB also allocated a $15 million loan to Access Bank in Azerbaijan. A relevant document was signed by the BSTDB Chairman and Chairman of Access Bank's Management Board Michael Hoffmann.
According to Hoffmann, the bank will spend the 3-year loan on the development of lending to small and medium-sized businesses.
The loan portfolio of Access Bank for small and medium-sized businesses is $260 million, which is 40 percent of the total loan portfolio of the bank, Hoffmann added.
BSTDB head Andrei Kondakov said that in total, the BSTDB Board of Directors approved seven projects in all 11 participating countries in the amount of 100 million euros on June 22.
"The two largest loans -- to the State Oil Company of the Azerbaijan Republic (SOCAR) and Access Bank -- fall to Azerbaijan, constituting $58 million and $15 million respectively," Kondakov said.
Earlier, following a business forum held in Baku on June 21 within the 15th Annual Meeting of the BSTDB Board of Governors, BSTDB signed agreements with three Azerbaijani financial institutions - Unibank, FINCA Azerbaijan and TBC Credit.
The first loan agreement worth $5 million, signed for five years with Unibank, is another contribution made by BSTDB to the development of Azerbaijan's economy, according to Andrei Kondakov.
Moreover, an agreement worth $10 million was signed with FINCA Azerbaijan credit institution. FINCA Azerbaijan is the leader of the microfinance market in Azerbaijan which is of particular importance for the development of rural regions, Kondakov said.
The other agreement, signed by BSTDB and TBC Credit, is worth $4 million.
Negative spillovers necessiate intraregional coop
Speaking at the Annual Meeting of the BSTDB Board of Governors, Azerbaijani Finance Minister Samir Sharifov said that the negative spillovers underscore the importance of further intra-regional cooperation.
"The Black Sea region was among the worst hit by the (Eurozone) recession," he said. "The spillovers of the recession have been felt by each country in the region. This resulted in the regional growth rate in 2012 of only 2.1 percent. For comparison's sake, these two indicators were 4.2 percent and 4.1 percent in 2010 and 2011 respectively."
Sharifov added that this is a clear signal to the regional financial and development institutions.
"We commend the efforts of the bank for the past fifteen years to promote cooperation by encouraging increased intra-regional trade and investments," Sharifov said. "Fifteen new operations amounting to 168 million euros were signed. The bank managed to post positive net income for the eighth consecutive year. The bank made 14.9 million euros of net profit in 2012. The contribution of BSTDB to the region cannot go unnoticed."
However, the bank has not realized its potential in full, the minister said.
"The size of the loan portfolio under $1 billion for an institution with 11 founding member states and the level of political presence and support it enjoys is not indicative of its real potential," Sharifov added. "Identifying new projects and designing new financing mechanisms at the time of limited credit options in the region represents a window of opportunity for the successful development of the BSTDB. High credit ratings achieved by the bank justify this."
Sharifov also pointed out that the current meeting would focus on the role of BSTDB in the region's economy, influence of cooperation of the member states on the development of financial institutions and the private sector, and elimination of the negative impact of the eurozone crisis on the bank's members.
Kondakov, for his part, briefed the participants on the activity of the bank in 2012, the successes achieved and future tasks.
The BSTDB Governing Council approved the annual report for 2012. The presidency in the Governing Council was passed on to Bulgaria and the event participants decided that the 16th annual meeting would be held in Sofia.
BSTDB is an international financial institution established by Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, and Ukraine. The bank supports economic development and regional cooperation by providing trade and project financing, guarantees and equity for development projects supporting both public and private enterprises in its member countries.
Currently, the bank's activities are mainly focused on the financial sector. BSTDB has opened credit lines to 10 Azerbaijani banks - International Bank of Azerbaijan, Access Bank, AGBank, Unibank, Texnika Bank, Demir Bank, Kapital Bank, Azer-Turk Bank, Bank Standard and Bank Respublika.
At present, Greece, Russia and Turkey remain the bank's largest shareholders with stakes of 16.5 percent each. Romania owns 14 percent, while Bulgaria and Ukraine - 13.5 percent each, Azerbaijan 5 percent, Albania 2 percent, Armenia and Moldova - one percent each, and Georgia 0.5 percent.
The bank's governor from Azerbaijan is Minister of Economic Development Shahin Mustafayev and his deputy is Finance Minister Samir Sharifov.
At the end of 2012, BSTDB's active portfolio in Azerbaijan consisted of 18 Board approved operations for the total amount of 87.7 million euros. Azerbaijan ranks fifth in terms of Board approved transactions with the figure accounting for 6.9 percent of the total portfolio, and signed operations with 7.5 percent of the total portfolio. The country also ranks fifth on outstanding financing, with 9.8 percent of the total portfolio.
Based on the 2011-2014 Business Plan, the bank would expect to approve new operations in Azerbaijan for about 18-26 million euros per year or approximately 88 million euros over the four-year period.