Azerbaijan Country Update (English)
Azerbaijan Country Update #14
Monday, June 09, 2008
Recent developments, decisions, and civil society activities related to activities of the International Financial Institutions (IFIs) in Azerbaijan.
Azerbaijan Country Updates provide information about recent developments, decisions, and civil society activities related to International Financial Institution (IFI) involvement in Azerbaijan including that of the World Bank (WB), International Finance Corporation (IFC), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB). If you would like to be included in or removed from the distribution list, please e-mail the moderator, George Holliday, at gholliday@bicusa.org. Correspondence with BIC may be conducted in Russian.
The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF. For more information about BIC, see www.bicusa.org.
Sections:
I. IFI Project Activities
II. Extractive Industry Transparency Issues
III. Civil Society Activities
IV. IFI Consultations and Policy Updates
V. Other Notable Developments
IFC Activities
May 16, 2008: The International Finance Corporation disclosed $20 million in financing for AzerDemiryolBank. The board meeting will take place on June 16, 2008.
AzerDemiryolBank (IFC website)
April 30, 2008: The IFC announced a maximum $6 million senior loan and $4 million convertible loan to Credagro, a non-banking credit organization in Azerbaijan, in an attempt to increase lending to SMEs and transition Credagro into a microfinance organization.
Credagro (IFC website)
March 29, 2008: The IFC signed an agreement for a seven year, $15 million maximum loan to Unibank as part of the IFC’s Azerbaijan Housing Finance Program, intended to develop the mortgage sector and expand funding access.
Unibank (IFC website)
World Bank Activities
May 27, 2008: The World Bank approved an additional $260 million in funding for the Second National Water Supply and Sanitation Project. The project will repair water supply and wastewater as well as sludge treatment facilities in rural areas. The second component will improve efficiency in AzerSu’s service delivery and strengthen overall management, procurement, and financial training in water and sanitation supply services.
Second National Water Supply and Sanitation Project (WB website)
April 29, 2008: The World Bank approved a $300 million highway project in addition to its original $200 million investment. The project aims to improve transportation and reduce shipment costs through rehabilitation of parts of the East-West as well as North-South corridors. The original project was screened as Category B project and bears resettlement and environmental issues.
Previous Highway 2 project (WB website)
Highway 2 project additional financing (WB website)
April 21, 2008: The World Bank financed $25 million in the Second Education Sector Reform Project to improve the quality of instruction, curriculum, teacher training, and assessment in secondary schools, as well as increase spending efficiency.
Second Education Sector Reform Project (WB website)
March 27, 2008: The World Bank invested $450 million in a Rail Trade and Transport Facilitation Project. The project will update the main West-East rail track and locomotives and introduce International Financial Reporting Standards and management and procurement training.
Rail Trade and Transport Facilitation Project (WB website)
March 27, 2008: The World Bank allocated $11 million to promote best corporate and public accountability practices in Azerbaijan. The project will improve accounting standards through legal and institutional frameworks, capacity-building, and a strategy for the public accounting sector.
Corporate and Public Sector Accountability Project (WB website)
March 27, 2008: The World Bank approved additional financing for a $15 million micro-project investment to increase access to basic infrastructure and services.
Rural Investment Additional Financing (WB website)
March 11, 2008: The World Bank sanctioned a $15 million investment in the IDP Economic Development Support Project aimed at improving living conditions for Internally Displaced Persons from the 1992-94 conflict.
IDP Economic Support Program (WB website)
EBRD Activities
April 29, 2008: The European Bank for Reconstruction and Development reviewed a proposed $60 million syndicated loan for the Microfinance Bank of Azerbaijan (MFBA) to be on-lent to small and medium enterprises. The investment would help MFBA access more capital and expand its SME lending, particularly in rural areas. The expected Board review date is June 17, 2008.
Microfinance Bank of Azerbaijan (EBRD website)
ADB Activities
March 17, 2008: The Asian Development Bank introduced a $160 million investment in Azerbaijan’s power transmission system to increase supply and reliability. The Power Transmission Enhancement Project would construct a 220 kV transmission line from Mingechaur hydropower plant to Absheron substation, a 220/110 kV substation, and associated 110 kV transmission lines. Board review is expected in September 2008.
Power Transmission Enhancement Project (ADB website)
December 19, 2007: The Asian Development Bank awarded a $3 million grant to boost trade within the Central Asia Regional Economic Cooperation (CAREC), of which Kazakhstan, Azerbaijan, China, Kyrgyz Republic, Mongolia, Tajikistan, Uzbekistan, and Afghanistan are members.
Trade in Central Asia (ADB website)
Overview
The Extractive Industries Transparency Initiative (EITI) was begun in 2002 by UK Prime Minister Tony Blair. It aims to improve openness and transparency in company payments and in government revenues from extractive industries. An independent auditor reconciles payments from companies with revenues received by the government.
EITI Progress
Azerbaijan has been involved in EITI from the initiative’s start. The country established a Committee on the Extractive Industries Transparency Initiative in November of 2003 and signed a Memorandum of Understanding on November 24, 2004. Reports are issued annually and semi annually and posted on the State Oil Fund website. The eighth report was published in March of 2008. Azerbaijan has been successful in gaining company support, as all 26 of the nation’s oil and gas companies have joined EITI. Azerbaijan is still a candidate country and will likely continue the validation process this year.
In February of 2008, Azerbaijan’s government proposed a United Nations General Assembly Resolution in support of EITI.
For more information, see the links below:
Revenue Watch Institute website
EITI website
Public Finance Monitoring Center website
IFI Involvement
- World Bank support of EITI includes administration of the EITI Multi-Donor Trust Fund and assistance to civil society groups and the EITI Secretariat.
- On April 12, 2008, the World Bank announced an Extractive Industries Transparency Initiative Plus Plus (EITI++) project, which offers governments additional options and technical aid for improving revenue management. Civil society groups, such as Publish What You Pay, have endorsed the project. EITI Plus Plus (WB website)
- As of January 2007, all investors supported by the International Finance Corporation must publish their payments to the government. The IFC will evaluate investor compliance in the first half of 2008. Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
- The European Bank for Reconstruction and Development (EBRD) has pledged support for EITI through active involvement in EITI consultation, promotion of transparency in revenue reporting and within the financial sector, and capacity-building aid for countries implementing EITI principles. EBRD EITI Policy (EBRD website)
- In February of 2008, the Asian Development Bank officially endorsed EITI. ADB Endorses EITI (ADB website)
Problem Areas
- More information is needed to hold the government accountable. Only a portion of oil companies have agreed to release data on a disaggregated basis, and EITI does not include extra-budgetary payments or payments at the sub-national level.
- Inconsistencies and delays in reports have caused concern among civil society actors.
- Given the extent of corruption in Azerbaijan, EITI’s effectiveness in the country is questionable.
Resources
Three Views of EITI Implementation in Azerbaijan, Economic Research Center, 2006 (ITEI website, Acrobat pdf 488 KB)
Memorandum of Understanding on EITI Implementation in Azerbaijan, 2004 (WB website, Acrobat pdf)
Conclusion by the ITEI Coalition of Civil Society Institutions on the (7th) Independent Accountant’s Report, ITEI, February 20, 2008 (ITEI website, Acrobat pdf)
EITI Independent Accountants' Report, Moore Stephens, December 31, 2006 (ITEI website)
Drilling Down: The Civil Society Guide to Extractive Industry Revenues and the EITI, Revenue Watch Institute, May 2008 (RWI website)
Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
Eye on EITI: Civil Society Perspectives and Recommendations on the Extractive Industries Transparency Initiative, Publish What You Pay and Revenue Watch Institute, 2006 (EITI website, Acrobat pdf)
Transparency International Report on Oil and Gas Companies
On April 28, 2008, Transparency International released a new report on oil and gas companies’ payments to host governments. The 2008 Report on Revenue Transparency of Oil and Gas Companies investigated 42 major companies operating in 21 countries, revealing that only a third of the companies attained a high-performance transparency rating on their reporting and payments to governments. The report includes companies operating in Kazakhstan, Russia and Azerbaijan.
Promoting Revenue Transparency Project (Transparency International website)
ITEI Coalition Released Opinion Summary on 7th EITI Report
On February 20, 2008, the Coalition, Increasing Transparency in Extractive Industries (ITEI), published its comments on the 7th EITI report in Azerbaijan.
Conclusion by the ITEI Coalition, ITEI, February 20, 2008 (ITEI website, Acrobat pdf)
The original EITI report is available from the Azerbaijan’s State Oil Fund website.
ITEI Assembly
Nearly 100 organizations have joined the Coalition, Increasing Transparency in Extractive Industries (ITEI), established in May of 2004. ITEI receives funding from the World Bank, as well as the Open Society Institute. On November 19, 2007, ITEI held its 10th General Assembly, and the coalition has hosted numerous roundtables and seminars in order to increase public awareness of EITI and oil development. More information on ITEI and Azerbaijan’s EITI process can be found at the ITEI website.
Transparency Journal Begins in Azerbaijan
On October 3, 2007, ITEI launched the Transparency in Extractive Industry journal dedicated to extractive industry related questions. The first issue investigated a range of issues, including the use of windfall revenues and contracts between the State Oil Company of Azerbaijan Republic (SOCAR) and foreign companies.
ITEI website
EIB Civil Society Workshop
On June 30, 2008, the European Investment Bank will hold a workshop for civil society organizations in Brussels, Belgium. The workshop will be in English and French and include observers from other international finance organizations. For more information and to request an invitation, visit the link below:
EIB Civil Society Workshop (EIB website)
Extended Consultation on EIB’s Environmental and Social Statement
The European Investment Bank has extended the public consultation period for its Environmental and Social Statement until June 20, 2008. A consultation meeting will be held in Warsaw on June 12. With sufficient stakeholder interest, the Bank intends to hold the second round of consultation between September 1 and 28 to seek input on the second draft revised Statement on Environmental and Social Principles and Standards. Submission details and the statement draft can be found at the links below.
Comment Submission Details (EIB website)
EIB Environmental and Social Statement (EIB website, Acrobat pdf)
Public Consultation on EIB's Environmental and Social Statement (EIB website)
EBRD Environmental and Social Policy
On May 12, 2008, the Board of Directors of the European Bank for Reconstruction and Development (EBRD) approved the Bank's new Environmental and Social Policy as well as a new Public Information Policy, one week before the EBRD's Annual Meetings in Kiev, Ukraine.
EBRD 2008 Environmental and Social Policy, May 12, 2008 (EBRD website, Acrobat pdf)
BIC comments on the draft EBRD Environmental and Social Policy, April 8, 2008 (BIC website)
EBRD Public Information Policy
The new Public Information Policy was approved on May 12, 2008, bringing some positive improvements to the previous policy. Civil Society comments on the initial discussion paper called for more transparent and amenable public consultation and disclosure provisions, an independent appeal system, and more timely and automatic disclosure of project impact information. Concerns were also expressed at the disclosure exceptions.
EBRD 2008 Public Information Policy, May 12, 2009 (EBRD website, Acrobat pdf)
Global Transparency Initiative and CEE Bankwatch Network comments on EBRD PIP, December 26, 2007 (GTI website, Acrobat pdf)
Independent Recourse Mechanism Review
EBRD is currently reviewing its complaint review system, the Independent Recourse Mechanism (IRM). It is also expected that a revised version of the IRM policy will be made public late 2008 for an additional round of public comment period that will last through January 2009.
EB Independent Recourse Mechanism (EBRD website, Acrobat pdf)
Study: Weak EBRD complaints mechanism (CEE Bankwatch study)
World Bank Consultations
The World Bank Group is seeking comments on its strategic priorities for civil society engagement. The process will take place from March until July of 2008. Additionally, the bank is drafting an issues paper on Climate Change, which is currently available for comment and will be discussed at the 2008 Annual Meetings. Details can be found here:
Strategic Priorities Framework for Bank – Civil Society Relations (WB website)
Climate Change Global Consultation page (WB website)
World Bank and IMF Spring 2008 Meetings Summary
The World Bank and IMF Spring Meetings addressed climate change, rising food and commodity prices, and the global credit crisis. Civil society meetings examined revenue transparency in extractive industries, anti-corruption measures, IMF conditionalities, and a variety of other issues. For summaries of official WB/IMF meetings as well as civil society strategy meetings, see the links below:
Bretton Woods Project (BWP website)
IMF and World Bank - Spring Meetings 2008 (IMF website)
WB and IMF: Revenue and Contract Transparency Assessment
Global Witness and Bank Information Center are conducting an assessment of revenue and contract/licensing transparency implementation in extractive industry operations by the World Bank, IFC and IMF. Preliminary findings of the assessment across 15 resource rich countries revealed that revenue transparency is inconsistent across countries and programs of these institutions. Both civil society involvement and contract transparency were rarely mentioned in institutions’ project/country documents and were only once used as progress indicator upon which further funding was tied. GW and BIC plan to release the final assessment during summer 2008.
New World Bank Website Publishes Company Payments
The World Bank launched a webpage, where IFC clients publish their payment to their host governments starting with operations in 2007. The webpage provides figures for companies that already disclosed payment figures and those planning to do so during June 2008, as well as projects that do not involve payments to the government.
IFC Extractive Industry Clients Government Payment Disclosure (WB website)
Independent Evaluation Office (IEO) Report
The International Monetary Fund leadership has commented on the IEO report of 2008. The report examines IMF governance structures, accountability, and stakeholder involvement. The comments and report can be found at the link below:
IEO Report and the IMF (IMF website)
EBRD 2008 Annual Meetings and Business Forum
Over 2,000 government, civil society, and business actors met in Kiev, Ukraine on May 18-19, 2008, for the EBRD’s Annual Meeting. Civil society groups were critical of the bank’s support of problem projects, such as Arcelor Mittal and Bautino II in Kazakhstan, and of new policies drafted without adequate commentary from civil society. These policies, energy efficiency, and banking systems formed some of the topics of discussion. More information on the meetings and civil society responses can be found at the following links:
2008 Annual Meetings (EBRD website)
Blogs and 2008 Annual Meetings News (IFIwatchnet website)
Comments on New EBRD Policies (BIC website)
EBRD's Annual Meeting (BIC website)
Asian Development Bank 2008 Annual Meetings
At the 2008 Annual Meeting in Madrid, Spain, on May 6-7, 2008, rising food costs were a major area of concern. The ADB committed $500 million to address the problem immediately and $2 billion for agricultural support in the coming year. The ADB also launched its Strategy 2020, which will help shape ADB activity in the future. Some civil society actors have objected to the strategy. Further news articles, summaries, and useful documents can be found at these sites:
Annual Meeting News and 2008 News (ADB website)
2008 ADB Annual Meeting and Civil Society Criticisms (BIC website)
NGOs Boycott ADB Consultations, ADB Agrees to Second Draft
Several members of the NGO Forum Network did not attend the Asian Development Bank’s April roundtable consultations, citing the draft Safeguard Policy Statement’s failure to comply with basic objectives. After U.S. and NGO pressure, the ADB agreed in May to release another draft and consultation.
ADB Consultations Boycotted (BIC website)
ADB Agrees to Second Draft (BIC website)
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