(MENAFN- Trend News Agency) BAKU, Azerbaijan, Feb.13. trend 's exclusive
interview with Rana Karadsheh, Regional Director of the
International Finance Corporation for Europe.
- What was the purpose of your recent visit to Baku and
what was the outcome?
I have recently made my first visit to Baku as IFC's Regional
Director for Europe to hear from the government, the private
sector, and development partners about new private sector
opportunities and how IFC could support Azerbaijan. The meetings
were extremely productive, providing important insights and
highlighting new opportunities.
- What do you exactly mean by“new
opportunities”?
Well, over the last 30 years, Azerbaijan has transformed to an
upper-middle-income country, now helping the poorest countries
through the World Bank's International Development Association.
Growth was driven by the oil and gas sector, which brought in
around 90
percent of azerbaijan's export revenues in 2021. But oil and
gas reserves are depleting globally, triggering price fluctuations,
especially with major changes in geopolitics and energy systems in
the region. Moreover, we also are increasingly realizing that,
regardless of a country's level of oil and gas resource, energy
diversification is simply important for overall resilience.
Decarbonization is crucial. It needs to be fast-tracked. While
oil remains a pillar, optimizing the non-oil economy is high on the
country's agenda. azerbaijan's 2030
national development vision focuses on maintaining a
competitive and sustainable economy, leveraging the power of the
private sector.
- What are IFC's plans on cooperating with Azerbaijan
this year and which sectors look most promising and attractive for
IFC?
IFC sees potential in several sectors – especially in supporting
private sector participation in infrastructure. Through both
investment and advice, IFC aims to help boost green growth,
strengthen transport corridors and connectivity, boost financial
inclusion and agriculture.
To increase the role of the private sector, IFC, in partnership
with the Swiss State Secretariat for Economic Affairs SECO, is
working with Azerbaijan's government to make it easier for
companies to invest in the non-oil economy.
Most recently, with IFC's advice, Azerbaijan adopted three laws.
The Law on Tourism aims to introduce new methods, including market
and competition-based means of regulation and quality assurance,
which are expected to reduce time and cost for the private sector.
In addition, the Law on Food Safety is designed to bring new
concepts to control the entire food chain and modernize the
national food safety management system. The Law on Investment
Activity aims to provide for investment protection guarantees and
is expected to contribute to attracting more investment.
These changes were all built on IFC's long-term work in
Azerbaijan. Over three decades, IFC has contributed to fundamental
investment reforms, including registration, inspections, licensing,
and permitting systems, supporting the country with legal,
institutional, and technical reforms.
Looking ahead, fintech is an emerging area that can support
financial inclusion, which is fundamental to development. As an
overview, in emerging markets globally,
1.6 billion people and 200 million small businesses do not have
access to formal financial services.
One way to change this is to optimize financial technology,
which is why IFC has partnered with the Azerbaijan Fintech
Association to help companies provide faster, cost-effective, and
efficient financial services. This is familiar territory for
IFC.
Over the years, in partnership with SECO, we have worked with
the government on regulatory reforms to strengthen financial
infrastructure and boost access to credit for smaller businesses.
IFC advised Azerbaijan on its first private credit bureau and on a
movable collateral registry, allowing smaller businesses to use
their movable assets-inventory, equipment, and so on -as
collateral. This supported the unlocking of an additional pool of
borrowers.
Based on this, IFC recently launched its Asset-Based Finance, or
ABF, project to support the enhancement of the legal framework
governing prudential regulation of ABF products, as well as the
setting up of a national ABF platform and the development of an ABF
product program for financial and non-banking financial
institutions.
- You've emphasized improving access to credit for small
businesses. What are the priority areas for cooperation in the
financial sector?
Banks and financial institutions are the main source of finance
for smaller businesses, which account for
45 percent of employment and a 15 percent share of value added in Azerbaijan.
That's why IFC has a strong focus on supporting the financial
sector. On the one hand, we work with financial institutions and
relevant agencies to increase the capacity to provide the services
their customers need. On the other hand, we provide funding, so
that banks can on-lend to small businesses, especially the
underserved, such as women entrepreneurs or customers in rural
areas.
Just last month we signed a financing package of up to $40
million to Bank Respublika to boost the bank's lending to micro,
small, and medium enterprises (MSMEs). The funding comprises $20
million by IFC, which will also mobilize up to $20 million more.
Around 50 percent of the proceeds will be earmarked for on-lending
to women-owned MSMEs. This project is supported by the
ifc women entrepreneurs finance initiative and the
women entrepreneurs opportunity facility .
- Agriculture is a key sector globally. What are IFC's
plans in Azerbaijan?
IFC, through its Agricultural Financing Project, implemented in
partnership with SECO, has supported local financial institutions
in launching value-chain financing products and helped the selected
value chains on strawberry and hazelnut crops increase their
competitiveness in export markets. Value chain financing was an
important step to enable farmers to access finance without real
estate collateral and with strong trust in crops exported to Gulf
or European markets.
IFC is cooperating with the government of Azerbaijan to
introduce innovative financing instruments to grow agriculture in
Azerbaijan and connect smaller farmers to global value chains.
These instruments are crop receipts, which allow farmers to obtain
pre-harvest finance against a promise to produce a certain quantity
of crops, and warehouse receipts (post season financing), which can
be used to provide financing in the form of short-term loans or
guarantees.
The government, farmers, financial institutions, and other
players see the benefits, and there are draft laws at the
consultation stage to enable these instruments.
- While visiting Baku, you launched a partnership with
Azerbaijan's Alat Free Economic Zone authority. What results are
you expecting?
As Azerbaijan focuses on a competitive and sustainable economy
to drive growth, the Alat Free Economic Zone (AFEZ) will be a
unique export-led industrial zone, designed to attract and grow
value-added and manufacturing activity.
Close to the Baku International Sea Trade Port and transport
corridors, AFEZ has the potential to become a regional industrial
hub, boost economic diversification, and ensure sustainable
economic growth. To support this, IFC signed a memorandum of
understanding with the AFEZ Authority to create a framework for
advisory and early-stage project development support for companies
interested in locating their operations in AFEZ. IFC, in
partnership with the Austrian Federal Ministry of Finance, and in
collaboration with the AFEZ Authority, will advise and support
AFEZ's tenants. The goal is to help companies identify and develop
investment projects that focus on supporting the country's net-zero
transition and its climate-resilient development path.
- While green transition is the buzzword in Azerbaijan,
what will a greener future look like? What are the government's and
IFC's cooperation priorities in the area of
decarbonization?
Accelerating decarbonization is crucial for competitiveness and
future prosperity. According to
an analysis by the World Bank Group's Energy Sector Management
Assistance Program, the estimated technical potential of
Azerbaijan's offshore wind potential is 157 gigawatts, which is
massive compared to the current total installed capacity of around
8 gigawatts.
As a private sector-led growth model is pursued, developing
offshore wind generation will help improve competition in the power
sector, strengthen essential infrastructure, and help tackle
climate change. Azerbaijan could transfer infrastructure,
equipment, knowledge, and its workforce to offshore wind.
An offshore wind
roadmap , released by Azerbaijan's Ministry of Energy, the World
Bank, and us at IFC, shows Azerbaijan has the potential to install
7 gigawatts of offshore wind power by 2040. This could create over
69,000 full-time equivalent years of employment and up to $7
billion in local gross value added.
Utilizing the potential will also allow Azerbaijan to become an
exporter of renewable energy to its neighbors and to the rest of
Europe, improving energy security, contributing to the
decarbonization of the European continent and increased
connectivity.
IFC and the World Bank are now working with the government on
how to implement the roadmap, to initiate offshore wind
development, and attract developers and private investors to the
country. Overall, implementing the roadmap could allow Azerbaijan
to emerge as a regional renewable energy powerhouse. IFC is
well-placed to work with Azerbaijan in this area and help it reach
the next level, by also leveraging private investment.
- What is your assessment of the so-called Middle
Corridor for Azerbaijan?
As global supply chains are still adapting to the disruptions
caused by the COVID-19 pandemic, the Russian invasion of Ukraine
has further complicated matters. The Trans-Caspian International
Transport Route or the Middle Corridor-this is a partnership
between Azerbaijan, Georgia, Kazakhstan, and Turkey-could serve as
an alternative route. IFC is looking at opportunities to support
infrastructure through the expansion of transport infrastructure in
Azerbaijan.
- What's the total amount of funding allocated by IFC to
Azerbaijan?
Over three decades, IFC has invested more than $500 million,
including close to $100 million through mobilization, financing
projects across sectors, including financial services,
infrastructure, and manufacturing. IFC supported Azerbaijan with
around $100 million in trade through its trade finance program,
provided $250 million for the Baku-Tbilisi-Ceyhan pipeline in 2004,
and implemented almost a dozen advisory projects to boost private
sector growth.
IFC is committed to its partnership with Azerbaijan, and we are
excited to be part of its dynamic journey.
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