(MENAFN- Trend News Agency)
BAKU, Azerbaijan, July 16. The International
Finance Corporation (IFC) is ready to support Azerbaijan in
low-carbon transition, Ines Rocha, IFC's Regional Director for
Europe said in an exclusive interview with Trend .
"Climate change is the biggest threat of our time, particularly
in emerging economies. Unfortunately, extreme weather events are
likely to increase. In Azerbaijan, floods already impact
100,000 peopl every year, and droughts and water scarcity are
constant threats. Azerbaijan's role as host of COP29 signals its
strong commitment to the climate agenda. The country's revised
Nationally Determined Contribution commits to a 40 percent
reduction in emissions by 2050, compared to 1990 levels," she
said.
Rocha noted that fast-tracking decarbonization will be crucial
to remain competitive in the global economy and ensure a
sustainable future.
"The
World Bank Group's Country Climate and Development Repor for
Azerbaijan estimates that $44 billion in investments is needed
until 2060 to achieve this, with a significant share coming from
commercial and private sector financing. The country would benefit
from diversifying its economy away from fossil fuels, investing in
climate resilience measures, and implementing the necessary policy
reforms to drive a low-carbon transition. We at IFC are well placed
to support the country on this journey. Renewable energy is a key
focus area for us. Azerbaijan's offshore wind potential is
estimated at 157 gigawatts, according to
an analysi by the World Bank's Energy Sector Management
Assistance Program, compared to a current total installed country
capacity of around 8 gigawatts," she added.
IFC's regional director noted that according to an offshore wind
roadma released by Azerbaijan's Ministry of Energy, the World
Bank, and IFC, Azerbaijan has the potential to install 7 gigawatts
of offshore wind power by 2040.
"Harnessing this wind power would help create over 69,000
full-time equivalent years of employment and up to $7 billion in
local gross value added. The Azerbaijan Renewable Energy Agency
estimates the country's economically viable onshore wind and solar
potential to be even higher, at 27 gigawatts. Reaching the
government's target of a 30 percent share of renewable energy
sources in electricity production by 2030, from the current level
of 7 percent, will require a change of pace," she said.
Rocha pointed out that IFC is well-placed to work with
Azerbaijan in developing its renewable energy potential, including
solar and onshore and offshore wind.
"Together with the World Bank, we are working with the
government on implementing an offshore wind
roadma to kickstart development and help attract developers
and private investors. One new area we are proud to support is
green building. A recent example: AlatBay Logistics Center,
operating within the Alat Free Economic Zone, has successfully
completed the design, construction, and audit stages of EDGE-an
innovative green building certification system implemented by
IFC-and been awarded the EDGE Advanced certificate. As part of
these efforts, the company has reduced its energy use by over 40
percent and water consumption by over 25 percent," she added.
More areas for cooperation
Rocha went on to add that another new area IFC is looking at is
water.
"Azerbaijan's water resource scarcity is projected to increase.
Between 50 and 70 percent of its runoff enters the country from
neighboring states, which are also facing increasing water demand
and projected water resource decreases. This high dependence on
transboundary water sources, combined with declining water
availability and increasing droughts, salinization, and water
pollution, poses a significant water security risk. IFC can support
Azerbaijan in developing a comprehensive strategy to bolster the
sector's sustainability," she said.
Rocha noted that another area the IFC is working on is
supporting women, particularly regarding climate.
"Women and their communities can be the greatest accelerators
for achieving global climate goals. Decarbonization and climate
adaptation will not be possible without their active participation
as leaders, employees, entrepreneurs, and stakeholders in climate
dialogue, policymaking, and finance. Pursuing gender-inclusive
climate investment is also critical because women are both
disproportionately impacted by climate change and less likely to
gain from new climate-related opportunities. We are exploring
avenues to support Azerbaijan in this direction," she said.
Micro, small, and medium enterprises
( MSME) Finance Platform
IFC's regional director noted that the organization has been
supporting micro, small, and medium enterprises (MSMEs) in
Azerbaijan through investments in existing partner banking
institutions and plan to continue that through existing and new
partners.
"This includes the recently approved MSME Finance Platform, a
global up-to $4 billion equivalent financing package focused on
investing in priority sectors. It includes a mobilization
component, leveraging IFC's own and donor resources while
consolidating key existing MSME financing tools. In Azerbaijan, we
are also working to expand outreach through new banking and
non-banking financial partners. IFC will provide funding to the
financial institutions, who will channel the proceeds to MSME
borrowers. At the same time, IFC will continue supporting its
client financial institutions as needed, with advisory services to
assist with capacity building as well as activities to raise
awareness among their MSME clients," she added.
Empowering women entrepreneurs
Rocha noted that to boost inclusion, especially for smaller
businesses and women entrepreneurs, IFC provided $40 million to its
longstanding client Bank Respublika last year, and the organization
is currently exploring how it can accelerate this work.
"IFC promotes sustainable agricultural practices in Azerbaijan
through events and workshops for financial institutions. We also
support these institutions in introducing financial products
focused on climate-smart agriculture. These products fund
technologies and practices that foster sustainable agriculture and
equip farmers with the tools and knowledge they need to adapt to,
and combat, the effects of climate change – helping to bolster the
sector's sustainability and resilience," she explained.
IFC's other priority focus areas in
Azerbaijan
Rocha pointed out that Public-private partnerships (PPPs) are
key to harness the private sector's capital and know-how to bolster
critical sectors such as infrastructure and healthcare.
"This is an area in which we are ready to work more with the
government. Digital infrastructure, and e-mobility especially, is
an emerging focus area, especially with COP29 on the horizon. The
transport sector currently contributes 22.6
percent to total energy consumption. This could be reduced
through investments that boost the roll-out of charging
infrastructure for privately financed electric vehicles and
increase urban transport options-for example, by renewing the
country's bus fleet, a process that has already started," she
said.
IFC's regional director noted that the organization welcomes the
government's
tax break for electric vehicles.
"Other measures such as increasing fuel efficiency
standard , providing incentives to replace old vehicles, and
making freight transport operations more efficient are also
important. The government is currently developing the necessary
regulatory, policy, and institutional frameworks and IFC aims to
provide both advisory and investment support along the value chain
where private sector solutions can be deployed. We are also
committed to supporting Azerbaijan's ongoing efforts to attract
more private investment in pharmaceuticals, transport and
logistics, and other productive industries.
Last but not least are digital financial services and the
innovative solutions they offer. With IFC's advisory support, the
Central Bank of the Republic of Azerbaijan is launching a
regulatory sandbox, which will help promote this by enabling
companies to test new products and models in a restricted
environment, under a regulator's oversight. That will help minimize
any risk, while boosting innovation, and consumer and investor
confidence," she said.
Benefits of Public-private partnerships for
Azerbaijan
Rocha noted that leveraging the private sector's capital and
expertise through PPPs is vital to help free up financing from the
public purse.
"The country has already taken positive steps in this direction.
The adoption of a new law on PPPs in December 2022 was a key move
towards restructuring the legal and organizational framework to
encourage PPPs, with the Ministry of Economy playing a pivotal role
in establishing a national PPP policy.
The establishment of a PPP Unit within the Ministry of Economy
early in 2023 was another welcome strategic move to identify
potential PPP projects and develop the necessary methodologies.
That underscores the growing interest in utilizing PPPs for
infrastructure development. IFC has been engaged in discussing
potential projects in Azerbaijan, and we are ready to work with the
government to help address some of the issues, including building
PPP capacity within the broader government, to boost private
investment in public infrastructure and social services," she
said.
IFC's key results in Azerbaijan
Rocha noted that IFC has invested over $850 million in
Azerbaijan to date, financing nearly 60 projects in financial
services, infrastructure, and manufacturing, as well as advising on
improving the business environment, financial sector development,
corporate governance, small and medium enterprises, and
agribusiness.
"Highlights include our work (in partnership with the Swiss
State Secretariat for Economic Affairs SECO) to boost
diversification by making it easier for companies to invest in the
non-oil economy. That has contributed to fundamental business
reforms, including in registration, inspections, licensing and
permitting systems. In addition, we've supported three laws with
strategic advice. The Law on Tourism aims to help reduce time and
costs for the private sector. The Law on Food Safety introduced new
methods to quality control the food chain and modernize national
food safety management. And the Law on Investment Activity provides
investment protection guarantees to help attract more investment,"
she said.
IFC's regional director pointed out that given agriculture's
high potential to boost non-oil growth and support rural jobs in
Azerbaijan, IFC is working with the government to introduce
innovative financing instruments, such as crop (pre-season) and
warehouse (post season) receipts, to strengthen the sector and
connect smaller farmers to global value chains.
"Small farmers often find it difficult to access loans because
they lack real estate collateral, a requirement for banks. Crop
receipts can be an effective solution, allowing farmers to use
future harvests as collateral to obtain working capital financing
to purchase seeds and fertilizers. Warehouse receipts, meanwhile,
allow farmers to access financing using their stored crops in
warehouses as collateral. In partnership with SECO, we have also
supported local financial institutions in launching value-chain
financing products, helping selected value chains (strawberry and
hazelnut crops) increase competitiveness in export markets," she
said.
Rocha noted that together with SECO, IFC has also supported a
series of reforms to improve the country's financial infrastructure
and boost access to finance for smaller businesses.
"These include the modern law on credit bureaus, which led to
the creation of the first private credit bureau in 2018, and the
secured transactions law, which allows smaller businesses, which
often lack assets, to use their movable assets-inventory, accounts
receivable, and equipment-as collateral. To further strengthen the
financial sector, IFC launched its asset-based finance (ABF)
project to enhance the legal framework governing the regulation of
ABF products. Looking ahead, we believe private sector solutions
are key and we are committed to helping unleash the private
sector's potential to drive a sustainable and inclusive transition
and create jobs," she concluded.
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