London, United Kingdom – Azerbaijan has undergone fundamental economic changes over the past few years. The increase in oil production and the opening of the Baku-Tbilisi-Ceyhan (BTC) pipeline at a time of high commodity prices have helped to make Azerbaijan the fastest growing economy in the world with an unprecedented 35 per cent growth in 2006. While growth has been strongest in the oil sector, spill over effects have also fuelled other sectors.

As the EBRD finds in its latest strategy for Azerbaijan, important structural reforms remain to be undertaken, particularly to ensure that the business environment outside the oil and gas sectors will support the rapidly growing levels of investment. The high income from natural resources provides a unique opportunity to create the conditions for sustainable growth of the whole economy.

The EBRD, which to-date has invested more than €720 million in Azerbaijan through more than 80 projects, stands ready to assist the country in meeting the challenges ahead. To this end the Bank will focus on the following operational objectives:

• Enterprise sector: The EBRD will contribute to the development of the non-oil sector with direct debt and equity investments alongside local and foreign investors and via support to the financial sector. Particular emphasis will be on micro, small and medium-sized enterprises, fully utilising the Bank’s instruments, resources and programmes. The Bank will also seek opportunities to work as appropriate with the newly established state-owned Azerbaijan Investment Company (AIC) to encourage investments in the non-oil sector. The Bank will promote improved standards of corporate governance, integrity, adequate financial disclosure and transparency of ownership in the corporate sect;
• Financial sector: The EBRD will continue its support to partner banks with the objective of developing larger, more diversified and sustainable banks. Special emphasis will be on regions outside Baku and providing increased support to the agriculture sector. The Bank will continue encouraging competition and consolidation and will support foreign investments in the banking sector. Additionally, the EBRD will support the further development of non-bank microfinance institutions as well as leasing and insurance companies;
• Infrastructure and Energy: The EBRD is expected to play an important and bigger role in large infrastructure investments planned for the medium term, in line with Azerbaijan’s goal to become a transit country between Central Asia and Europe. The Bank is already working closely with the Government in the power sector and will help ensure key sector reforms and legislative and regulatory changes. The Bank will focus on transport with a particular focus on transit corridors, energy, municipal infrastructure and the environment.

The EBRD’s operations in Azerbaijan will benefit from the regionalisation of staff resources through the recent establishment of an operational hub for the Caucasus in Tbilisi.