FINISH WHAT YOU START

Azerbaijan's modern economic his-tory is replete with remarkable events marking the implementation of major projects of both local and regional importance. Almost every year since the signing of the "Contract of the Century" (1994), the country has seen significant ceremonies or forums of international importance promoting the republic's integration into the world economy. 2007 was no exception - it was full of events that will certainly go down in our history. This is backed up by the country's leadership of the CIS for its level of growth in GDP, which reached 25.4 per cent according to figures for the first 11 months of 2007 (per capita GDP - 2,865 dollars). Thanks to this, Azerbaijan is now recognised as a country with an average level of development. The volume of investment exceeded 6 billion dollars in 2007, which is 16.8 per cent more than for the same period in 2006. We could carry on listing the statistics, but we think a picture of the past year will be indicated more graphically by the key events of 2007.

Azerbaijan becomes a gas exporter

Unlike in previous years, when Azerbaijan focused its main attention on the extraction and export of oil, 2007 was dedicated to gas. It was in 2007 that the country finally became an exporter of natural gas - a situation awaited for more than 10 years. The first gas extracted from the Sah Daniz field was supplied to Turkey in summer and a protocol on the direct export of blue fuel to Italy was signed in December. About five European countries have already expressed their intention to buy our gas and the relevant documents may be signed early this year. The infrastructure for transportation is already in preparation. For example, on 18 November, Azerbaijani President Ilham Aliyev took part in the opening ceremony of a gas pipeline connecting Turkey and Georgia. Moreover, by the end of 2012, it is planned to build another pipeline along the Adriatic seabed. This pipeline will connect Greece and Italy.

Furthermore, OMV, the company operating the Nabucco gas project, opened an office in Baku in September, on the sidelines of a visit by an economic delegation from Austria, led by Minister of Economy and Labour, Martin Bartenstein. At the same time, Bartenstein and Azerbaijani Minister of Industry and Energy, Natiq Aliyev, signed a protocol of intent covering cooperation between the two countries in the energy sector, specifically on the Nabucco project (the preparation of documents and settlement of various problems concerning the project) and on the use of alternative sources of energy. The State Oil Company of Azerbaijan was earlier invited to participate in the construction of this pipeline. The Nabucco pipeline will ensure the supply of Central Asian and Caspian gas to Europe via Azerbaijan, Georgia, Turkey, Bulgaria, Hungary, Romania and Austria. The gas pipeline is expected to come into operation in 2011. Its construction will cost about five billion euros.

All these events "conveniently" coincided with BP's announcement, on behalf of its Sah Daniz partners, of the discovery of another gas condensate deposit in this field while drilling assessment well SDX-04. The volume of gas condensate will be defined after more assessment wells are drilled, but it is already clear that new technology, available soon, will be required for extraction.

Thus, thanks to the commencement of extraction at Sah Daniz and the successful implementation of the gas programme of the State Oil Company of Azerbaijan on the basis of which it handed over 5.2 billion cubic metres of gas to the state in 2007, the country has not just ceased to import "blue fuel", thus saving a lot of money, but is actually becoming an important player in the European gas market.

Transport and communications - new opportunities

Transport was, perhaps, the second most prominent sector of the economy last year. It was in November 2007 that the foundations of the new Baku-Tbilisi-Kars railway were laid near Marabda station in Georgia. The project plans for 29 of the 105 km section of the railway to be built in Georgia (to the Turkish border) and 76 km in Turkey. Moreover, a 183 km section of the Akhalkalaki-Marabda-Tbilisi railway will be reconstructed in Georgia. Further, it is planned to build a station in Akhalkalaki to transfer trains to the European-width track. At the first stage, it is planned to transport up to five million tons of cargo per year by the Baku-Tbilisi-Kars railway. The volume of cargo transported will increase in the future. In fact, this project marked a first in terms of financing such initiatives. Azerbaijani President Ilham Aliyev said "Whereas we had previously held unsuccessful negotiations with international financial organizations, today we are financing our own regional projects ourselves". Azerbaijan will allocate a loan of 200 million dollars to the Marabda-Kartsakhi Railway limited liability company, for a period of 25 years, at an annual interest rate of one per cent, for the construction of the Georgian section of the railway. The State Oil Fund of Azerbaijan has allocated 50 million manats.

As for transport and road projects of local importance, suffice it to say that six of the nine bridges under construction in Baku came into operation in 2007. Several underpasses and flyovers have been built and opened, roads have been reconstructed in various regions of the country and so on. And this programme will continue in 2008.

Last year President Aliyev declared information and communication technology to be the second priority sector for economic development, after oil and gas. Progress in this direction will be secured by the establishment of regional innovation zones (RIZ) in which technoparks - centres manufacturing IT hardware and software - will be built. The RIZ project, drawn up by the Ministry of Communications, has already been examined by most other ministries and the Azerbaijani parliament may pas the necessary law by the end of the year. The world's leading IT companies are ready to participate in the Azerbaijani innovation zones. We should mention that, over the last four years, the average annual pace of growth in the information and communication technology (ICT) sector amounted to about 30 per cent in Azerbaijan, exceeding the world average by a factor of 2.7.

This year saw a long-awaited event in the ICT sector: a third mobile operator was launched; it will compete with existing mobile operators and promote development in this market.

Investment in the future

In 2007 Azerbaijan also successfully continued the development of international economic relations, within both bilateral business forums and intergovernmental commissions and by means of direct negotiations between the heads of economic departments. Germany, Austria, Estonia, Poland, Switzerland, South Korea and Cuba - are just some of the countries with whom meetings were held to this end. These meetings focused mainly on cooperation in non-oil sectors of the economy. Foreign partners were offered specific projects in which the government is ready to attract investment.

Incidentally, the Azerbaijan Investment Company began active work in 2007. It has already begun to implement a number of projects to provide for the establishment of manufacturing enterprises. One of the most significant successes of the AIC was the establishment of a joint company with the Islamic Corporation for Development (ICD) - the Caspian International Investment Company. The authorized capital of the new company will be 70 million dollars, with the AIC possessing 25 per cent of its shares (14 million dollars). The joint venture will begin investing in projects in Azerbaijan in early February next year.

An agreement has also been signed with the South Korean company, KEPCO, on the construction of Azerbaijan's first private thermal power station, with a capacity of 700 MW. Investment in this project will total between 750 million and one billion dollars. This project will help boost competition in the market of power generation, in which private companies produce only 17 MW today.

As for the financial sector, the most remarkable event here was the establishment of another long-awaited organization - the Deposit Insurance Fund (DIF). The main purpose of the fund is to guarantee the return of bank savings to depositors if a bank goes bankrupt. Thirty-seven banks operating in Azerbaijan under licence from the country's National Bank to accept deposits from the population, have already joined the Deposit Insurance Fund.

The beginning of mortgage crediting, including the introduction of social mortgages, has also played a significant role in socio-economic growth.

But this is not all that 2007 will be remembered for. Remember how many enterprises, schools, medical institutions, power plants and roads were opened in the regions of the country with the direct participation of President Ilham Aliyev. We can also list many other projects launched last year. We wrote about them throughout the year, and we only mention here the most significant projects. The most important thing now is to ensure that all these initiatives continue in 2008.