Azerbaijani Financial Opportunities Brought To The City Of London

More than 150 investment bankers, investment specialists, lawyers, consultants, analysts and journalists descended on the UK Headquarters of Baker & McKenzie in the City of London on 7 November to learn of the exciting opportunities presented by the nascent Azerbaijani financial sector.

During the conference, organised by The European Azerbaijan Society (TEAS) and Baker & McKenzie CIS Ltd., Lord Laird, Chairman, TEAS Advisory Board, commented: “Azerbaijan is a westward-facing country, and many of the young people in the financial sector are western-educated. They are taking the lead from the UK and other western countries, and this is resulting in the rapid development of Azerbaijan. The UK and Azerbaijan have particularly strong links, and the UK remains the greatest foreign domestic investment (FDI) contributor to the country.”

Dan Matthews, Partner, Baker & McKenzie CIS Ltd., stated: “The Azerbaijani economy is driven by oil and gas, and the GDP has continued to expand, despite the global financial crisis. Total has recently made further discoveries in the Caspian, and the State Oil Company of the Azerbaijani Republic (SOCAR) is planning an independent refining complex. The economy will remain buoyant, and Azerbaijan is looking outward. It is particularly looking to the West regarding development of the financial sector. It has small external debt, but its banking sector remains underdeveloped. The cost of finance remains high, and it urgently needs external finance.”

In the first session, focusing on the Banking Sector, Fuad Huseynli, Managing Director and Deputy Head of Communications, VTB Capital (London) continued: “There is a great urge to diversify away from the hydrocarbon sector, and such projects as the development of railway infrastructure are now being planned. In addition, SOCAR is now planning a bond issue for the end of the year. Azerbaijan welcomes the West, and projects in the country require substantial overseas finance.”

Israfil Mammadov, Chief Investment Officer, State Oil Fund of Azerbaijan (SOFAZ), explained: “SOFAZ operates a sovereign wealth fund, aimed at investing revenues from finite hydrocarbon resources to ensure sustainable economic development. Investments must be made outside of Azerbaijan, and this provides opportunities for Western banks.”

The second session, on Capital Markets, highlighted some of the areas of development. Emin Muradov, Head of the Research and Market Development Department, State Committee for Securities explained: “There is a great need for a bond market in Azerbaijan. Securities are particularly required to finance infrastructure projects and to facilitate the expansion of small- to medium-sized enterprises (SMEs).” Taco Sieburgh Sjoerdsma, CFA–CFO, Sturgeon Capital, based his observations on his 15 years’ experience in Baku, stating: “It is necessary to develop the capital market through long-term bank deposits, and to implement the legislation that supports capitalisation.”

The final session, on International Financial Institutions (IFIs) as strategic investors in Azerbaijan, began with some observations from Christopher Falco, Senior Banker, Financial Institutions, European Bank for Reconstruction and Development (EBRD). Speaking on the basis of his 18 months in Baku, Falco explained: “Azerbaijan is an early transition country, and we have implemented an investment banking programme. It is necessary for Western financial institutions to be present to ensure the systems develop and operate in the preferred manner.” He also revealed that the Azerbaijan EBRD Transition Report 2011 will be released on 15 November.

A similar approach was recommended by Uzma Khalil, Financial Sector Specialist, Private and Financial Sector Development Europe and Central Asia Region, The World Bank, who explained: “The World Bank is working closely with the State Committee for Securities, and finalising a strong regulatory framework, particularly regarding supervisory methodologies. More large banks and increased competition in the sector are a necessity, and we are working to implement the State Programme on Development of the Capital Market.”

Following an animated question-and-answer session, all those in attendance acknowledged the importance of the event at this pivotal time in the evolution of the Azerbaijani banking sector.