Azernews.Az

By Aynur Jafarova

The European Bank for Reconstruction and Development (EBRD) has said it has developed plans to promote market-oriented economy, diversify and develop sustainable financial sector, and improve business environment in Azerbaijan.

The EBRD's draft strategy for Azerbaijan has been designed for three years between 2014 and 2017.

The EBRD is aware of the Azerbaijani government's opinion about the plans and intends to receive comments until April 12.

"It is important for Azerbaijan to achieve significant progress in diversifying its economy in the next strategic period", the EBRD document said.

Nevertheless, the bank will remain involved in those projects in the field of hydrocarbon production to support increased competition and the introduction of best management practice, a policy dialogue to improve the regulatory framework.

"The involvement of the country in such strategically important projects as the Southern Gas Corridor will contribute to the diversification of export routes and energy security of Europe", the document said.

The EBRD also said Azerbaijan has made some progress in structural reforms.

"The government has made some improvements in tax administration with a view to both reducing tax compliance costs for businesses and increasing tax collection rates. The new Customs Code, which came into effect in January 2012, includes strengthened provisions in various areas that are expected to bring regulations into line with international standards (including verification of the country of origin, valuation methods, single window principle in customs administration, customs audit, and electronic submission of information on goods to the customs authorities)," the document said.

However, the reform process has had limited impact on corruption and should be intensified, EBRD analysts believe.

"The North-South rail corridor, linking Azerbaijan with Russia and Iran, as well as country's main East-West railway transport corridor, are being upgraded with the support of World Bank and other international financial institutions (IFIs)".

EBRD also noted the recent launch of construction of the international port, the largest in Caspian region.

"The port should help strengthen the country's role as a trade link between Europe and Asia," EBRD said.

"In June 2013, the Shah Deniz consortium chose the TAP pipeline as a potential export route to Europe. Also, Azerbaijan signed an intergovernmental agreement with Turkey on the construction of the TANAP pipeline, which will carry gas to Europe and Turkey," the document noted. "In December 2013, Azerbaijan signed a memorandum of understanding on future gas supplies to Albania, Croatia and Montenegro. The new route should diversify Azerbaijan's export routes to international markets and Europe's access to energy imports".

The document also noted improvement of the energy efficiency of Azerbaijan remains one of the major tasks standing before the country's economy.

"Azerbaijan's economy, in particular in the housing sector, is one of the most energy-intensive economies in the region. The amount of energy consumed per dollar of gross domestic product (GDP) in purchasing power parity is almost 1.2 times more than on average for the 27 EU countries. The companies with plans of measures for the development of energy efficiency have implemented more relevant projects and invested in this sector more than enterprises which have not conducted organizational measures," the bank said.

The bank also said the non-oil sector, supported by fiscal and monetary policy, will continue to play a leading role in Azerbaijan's economy in the mid-term prospective.

The EBRD invests in the enterprise, financial and infrastructure sectors to promote sustainable growth in Azerbaijan.

As of late November 2013, the EBRD has undersigned a total of 138 projects with cumulative investment value of 1,577 million euros since initiating its operations in Azerbaijan in 1991.

The total value of these projects was 6.6 billion euros. Some 35 percent of the bank's cumulative investments were made in the energy sector, 33 percent in the financial institutions sector, 21 percent in the infrastructure sector, and 11 percent in the corporate sector.