By Aynur Karimova
Access to the huge market potential presented by Asian economies may play a key role in Azerbaijan's aspirations to diversify its economy.
Enjoying enormous resources and high economic growth rates, Azerbaijan has the opportunity to realize its initiative to turn into a regional hub between Europe and Asia. The country, located at the crossroads of the Eurasian transport corridors, is involved in major energy projects of interest to Europe.
The Azerbaijani government has signed the agreement on the establishment of the Asian Infrastructure Investment Bank along with 56 other founder-states in Beijing on June 29, a measure that would help it to master Asian markets.
Positioning itself as the main channel on the East-West Strategic Corridor linking Central Asia to the Euro-Atlantic Area, Azerbaijan is a natural bridge between Europe and Asia and a gateway to the Asian markets that are not quite yet accessible to the West.
Azerbaijan's growing economy backed by energy wealth, internal stability, and a Western-oriented policy has given it a chance to realize large-scale projects in the geopolitically complex location. Now it’s time for Azerbaijan, the only Caucasus country with a real potential for implementing major regional projects, to utilize its strategic position by acquiring assets in Asian markets.
A successful energy policy pursued by the government has enabled the South Caucasus country not only to stand on its own feet, but also to create its own effective model of economic development.
Today the country is not only actively developing its own economy and initiates regional and international projects, but is also a major investor in many countries.
China, as the second largest economy in the world, remains an attractive market for a growing number of foreign investors, including those from Azerbaijan. Prospects for the Chinese Yuan as an additional investment currency attract considerable interest from various categories of investors, including sovereign wealth funds.
Azerbaijan's state oil fund SOFAZ, which effectively utilizes its revenues from the sale of oil and gas resources, has laid the foundation for mastering the Asian financial market. In May 2015, Azerbaijan's State Securities Committee and the Chinese Securities Regulatory Commission signed a memorandum envisaging the protection of investors and the promotion of integrity in the securities market, futures, and other related investment instruments by expanding the scope of cooperation and facilitating the exchange of information.
This memorandum, as well as an agreement concluded between SOFAZ and the Central Bank of China, will allow the fund to invest $500 million in bonds denominated in Chinese Yuan in the near future.
Membership to the AIIB, set to be a major financial institution of significant international importance, promises to attract credit funds on favorable terms for Azerbaijan, giving the country avenues for new sources of financing. Given Azerbaijan’s interest in the development of large-scale energy and infrastructure projects, it will have ample opportunities to obtain favorable loans from the new financial institution.
Second, Azerbaijan's participation in the activities of AIIB will allow further exploration into the prospect of becoming a major trading partner in the Asian market and provide the basis for closer relations between Azerbaijani and Asian companies.
The country, known throughout the world as a reliable supplier of hydrocarbons to international energy markets, has the ability to become a gate ensuring entry to alluring Asian investors. Azerbaijan entering the vast Asian financial market will diversify its international activities and bring it new dividends.
Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova
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