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 KAZAKHSTAN International Business Magazine №1, 2007
 Azerbaijan and Kazakhstan. Many Good Projects!
Azerbaijan and Kazakhstan. Many Good Projects!
Kazakhstan and Azerbaijan are two Caspian states which are united by not only the Sea of Friendship but also a number of strategic initiatives and projects. The Azerbaijani ambassador extraordinary and plenipotentiary to Kazakhstan, Lyatif Gandilov, discusses our economic potential and the new aspects of integration between our countries.
Mr Gandilov, what is your assessment of the results of Kazakh Prime Minister Karim Masimov’s recent visit to Baku? Will accords reached during his visit give a new impetus to investment projects?
Let me begin with the fact that Azerbaijan and Kazakhstan are, by definition, brotherly nations. We are united by common Turkic roots, common culture and common spiritual legacy. That is why we aim to strengthen partner and mutually-profitable relations to benefit our peoples and countries. We considered your prime minister’s visit as an indicator of the desire to expand the potential of economic integration and development in the entire Eurasian region.
As you well know, Azerbaijan and Kazakhstan, as Caspian states, represent a natural bridge between the West and the East. As a result, a new stage of our cooperation in the spheres of transport, energy and trade opens another door to the East for Europe.
At the same time, our partnership is not only limited to trade. Kazakhstan’s move to join the Baku-Tbilisi-Ceyhan oil pipeline offers our countries great prospects for strengthening their positions at both regional and international levels.
It is very encouraging that work to find new spheres of cooperation between our countries is being conducted not only at the highest level.
For instance, during your prime minister’s visit, Kazakh and Azerbaijani business circles held meetings which defined areas for future cooperation. These meetings also discussed Kazakh grain supplies to Azerbaijan and Azerbaijani farming produce supplies to Kazakhstan, as well as partnerships in transporting and transiting hydrocarbons, and a number of other important issues.
As far as we know Azerbaijan’s economy, like the Kazakh one, relies on the oil industry.
Of course, this sector plays a defining role in our country’s economy. But there are some particular issues. For example, Azerbaijan’s economy grew by 34.5% in 2006, but without the oil sector it would have only grown by 11%. I would call this a very good result. Moreover, the non-oil sector accounted for 84.1% of GDP last year.
GDP per capita stands at $2,400 in Azerbaijan now. The country’s foreign exchange reserves reached $4bn in 2006 and foreign debt was $232 per head, while inflation did not exceed 8.3%.
Our economic achievements have a clear social orientation. Last year saw the level of poverty falling from 29% to 20% (the figure stood at 49% in 2003). Over the past three years, 520,000 jobs have been created in Azerbaijan, including 360,000 permanent ones.
With the growing state revenues budget spending is also growing adequately: spending totalled only $1.4bn in 2003, whereas it will reach $6.5bn in 2007. Four power plants were commissioned in our country last year alone. The country is expected to invest $1.5bn in fixed assets this year.
Azerbaijan is an open state — in everything! This is proven by an attractive investment climate and favourable atmosphere created for investors. In terms of foreign investment per head Azerbaijan has taken up a leading position in the CIS and central Europe. Our economy attracted $7bn last year alone.
What attracts Kazakh investment to Azerbaijan?
An example of successful cooperation between our countries in the investment sphere is the construction of a grain terminal with a designed capacity of 500,000 tonnes a year in Baku. This project, worth $6m, has been funded by Kazakhstan and Azerbaijan on a parity basis. It should be noted that our country consumes about 3 million tones of grain a year, of which only two-thirds is covered by domestic production — we have to import the rest.
As you can see, this project met the interests of both the Azerbaijani people and Kazakh exporters. Moreover, this initiative is expected to continue — a mill is also to be built in Baku. The two countries’ governments have lifted all the restrictions and created all the possibilities for launching the construction.
We intend to further expand cooperation in the sphere of farming produce supplies, focusing on interregional contacts. We have our eye on the western regions of Kazakhstan attached to the Caspian Sea. The governor of Mangystau Region, Krymbek Kusherbayev, discussed the issues of boosting the Sumgait-Aktau and Baku-Aktau sea routes during his recent visit. Moreover, our business circles intend to build a facility to store farming produce at the Aktau port, where fresh and conserved vegetables and fruit could be supplied to all over Kazakhstan from. Above all, I believe that the population of your country’s western regions is interested in this project, because of their problems with their specific climate and soil dryness.
I can say that transport cooperation also offers us huge benefits. Sea is the cheapest transport means. Using this potential, we could significantly increase freight between our countries, which totals about 10 million tonnes at the moment.
Cooperation in the transport sphere is not limited to the sea. It has been announced that Azerbaijan intends to interest Kazakhstan in building a Baku-Tbilisi-Kars railway line worth $420m. What is the current state of this initiative?
At the moment, we are only trying to attract interest in this project from business circles and national companies from neighbouring countries. One thing is clear — this project will be beneficial to everyone. The construction of a Baku-Tbilisi-Kars railway line will cut the distance between the West and the East by 3,000 km. This is the shortest route to southern Europe. I believe that Kazakhstan will become interested in this project because it would make it possible to supply Kazakh petroleum products to Europe by rail.
Laying down a Trans-Caspian optic-fibre line is another breakthrough project. This will be efficient, because it will cut down telecommunications costs. The commercial extraction of hydrocarbons is expected in the Kazakh sector of the Caspian Sea in the near future. This will immediately boost the significance of our cooperation in transporting them. Your country has already joined the Baku-Tbilisi-Ceyhan oil pipeline. As far as I know, Kazakh specialists are seriously studying the Trans-Caspian routes for transporting hydrocarbons and possibilities and ways of joining the Baku-Erzurum gas pipeline. Part of this pipeline has already been built, and gas extracted in the sea is already being supplied to the shore. I dare to hope that the Kazakh interest in joint projects in Azerbaijan will continue to grow in the future.
What else can Azerbaijan offer in addition to transit possibilities and farming output?
Cooperation in petrochemistry and oil machine-building has great potential. For example, we can set up a joint venture from the existing oil machine-building plant in Baku and produce equipment for offshore drilling. Our specialists are able to supply services to repair wells and spare parts to Kazakh oilmen.
We are ready to take part in specific projects in the oil sphere. Back in Soviet times, a plant to produce modules and drilling facilities for offshore oil extraction was built in Baku. Let me note that Baku-made facilities are several times cheaper than foreign ones.
In addition, we are ready to discuss building tankers and ships, as well as repairing and docking them for Kazakhstan. All this will demand that relevant accords be reached between economic entities of our countries.
We also see serious prospects in the financial sphere. For instance, the management of Kazakhstan’s Bank TuranAlem has announced its intention to expand its operations in Azerbaijan. I think that the idea of setting up branches of an Azerbaijani bank in Aktau and Almaty will also be welcomed in Kazakhstan. Our financial institutions are studying the possibility of their involvement in the Almaty Regional Financial Centre and setting up an insurance bank.
Once again, I would like to note that we do not want to limit ourselves to any particular sphere. The more realistic projects there are, the further our cooperation will develop.
The Republic of Azerbaijan
Capital: Baku
Area: 86,600 km2
Population: 8,436,000 people
Currency: Azerbaijani manat
Azerbaijan is located in the eastern part of the Caucasus, on the southwest cost of the Caspian Sea. Borders Russia and Georgia in the north, Armenia in the west and Iran in the south. Azerbaijan’s Naxcivan Autonomous Republic borders Armenia, Iran and Turkey.
The head of state is president, elected by popular vote for five years. President appoints all government officials. The supreme legislative body is the unicameral Milli Mejlis (National Assembly); members elected by popular vote for five years in single-seat constituencies.
Azerbaijan is an industrial and agricultural country. Oil and gas extraction, oil processing, chemistry, machine-building, mining and metallurgy, and the food and light industries are main sectors of the economy. The agriculture sector specialises mainly in growing grapes, fruit, tobacco and vegetables, as well as animal husbandry and silkworm breeding.
The country’s chief port is Baku, which is linked with railway ferries with the eastern ports of the Caspian Sea (Turkmenbasi, Aktau and Bekdas). Navigation on the Kura river. Pipelines: Baku-Novorossiysk, Baku-Supsa, Baku-Tbilisi-Ceyhan.
The Azerbaijani economy has been booming in recent years. The country’s GDP reached $20.4bn in 2006. The economy has been growing at 13.6% a year on average over the past 10 years (GDP has grown by 740% since 1995). These growth rates are maintained by a growth in hydrocarbons output and exports (including as a result of the launch of the Baku-Tbilisi-Ceyhan oil pipeline in 2005 and gas extraction from the Sah-Deniz field in late 2006), as well as a growth in world oil prices. Part of the revenue from hydrocarbons exports is accumulated in the State Oil Fund (worth $1.6bn in December 2006).

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