Azerbaijan Country Update #6, May 2005
23 May 2005
The Azerbaijan Country Update provides information about recent developments, decisions, and civil society activities related to International Financial Institution (IFI) involvement in Azerbaijan
By Jelena Kmezic, May 2005
Also Available [Pусский]
The 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 Asian Development Bank (ADB). If you would like to be included or removed from the distribution list, please email the moderator, Heike Mainhardt-Gibbs at . Correspondence with BIC may be conducted in Russian.
I. IFI Project Activities
World Bank projects under consideration
The World Bank staff and Azerbaijan government scheduled a tentative meeting for July 15, 2005 to discuss the Poverty Reduction Support project. Global Environment Facility (GEF) Council approval is scheduled for May 15, 2005. As stated in the Project Information Document (PID), this project is supposed to help in implementing fiscally sustainable policies that support a higher quality of life and that are consistent with the country's overall growth strategy. The World Bank will provide US$20.0 million for the project. All project documents can be obtained at the following website:
The World Bank has released a Public Information Document (PID) for the Gas Utilization from Guneshli Flared Gas Project, Vol. 1 of 1. According to the WB the objective of the project is to provide an incentive to the private sector to invest in utilization of associated gas from the Deep-Waters Guneshli off-shore field. World Bank financing will be determined during project preparation. The project will be coordinated and facilitated by the State Oil Company of Azerbaijan (SOCAR), but will involve other (private) entities that will provide capital towards up-front investments. The Bank Approval date for the project is scheduled for October 25, 2005. The PID is available on the World Bank website and can be viewed by clicking on the following link:
World Bank Approved Poverty Reduction Support Credit
On May 17, 2005 the World Bank approved the First Poverty Reduction Support Credit (PRSC I) for the Azerbaijan. The stated objective of this project is to provide support to the Government in it’s efforts to carry out reforms as defined in the country’s State Program on Poverty Reduction and Economic Development (SPPRED). The World Bank will provide a total of US$20 million for the Republic of Azerbaijan. To view documents related to this project please follow this link:
World Bank Approved Power Transmission Project
On May 17, 2005, the World Bank approved Power Transmission Project. The World Bank will provide US$48 million loan for this project to be used for improving management and performance of the high-voltage transmission network which should in turn improve reliability, quality, and cost-effectiveness of the electricity supply in the country. All available documents related to this project are available via the following link:
World Bank considers a new Country Assistance Strategy for Azerbaijan
On May 6, 2005 the head of the WB office in Baku, Ahmed Jehani, told reporters that the World Bank is expected to start discussions on the new strategy with the Azerbaijani government late in May. “We hope the document will be put on approval by the WB board of directors in October”, said Jehani. The WB representative did not elaborate on the number of projects included in the new strategy and its cost, as these issues will be specified during the negotiations. (Source: AssA-Irada News Agency, May 6, 2005)
New EBRD regional project
On April 28, 2005 the EBRD released Project Summary Document for ETC Non-bank MFI Framework project. The proposed project is supposed to assist leading non-bank Microfinance Institutions (MFIs) to expand and improve their lending technology so as to increase access to finance for the smallest of borrowers across the Early Transition Countries (ETCs) of Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan. EBRD will provide a total of US$10 million in the form of senior loans to non-bank MFIs. Individual loan sizes will be from USD 0.3 million to USD 2 million. Board date for the project is scheduled for June 1, 2005. Project document summary can be viewed here:
II. IFI Consultations and Policy Updates
EBRD released Transport Operations Policy
On April 19, 2005 the EBRD Board of Directors approved the new Transport Operations Policy which replaces the document approved in February 1997. Transport Operations Policy sets out the general strategic and operational role of the Bank in this sector and establishes the overall framework for the Bank's activities.
The CEE Bankwatch Network finds that the new EBRD transport policy lacks clear objectives and commitments for the promotion of sustainable transport across the region. According to Bankwatch staff, in order to promote environmentally sound and sustainable development, the EBRD should reverse the current transport trends in Central and Eastern Europe where the development of road transport is outstripping the development of sustainable public transport modes, in particular rail. The new EBRD transport policy fails to address these damaging trends which are impacting heavily on social welfare, helping to accelerate climate change and causing irreversible damage to our region's biodiversity.
The full policy and public comments were published on April 27 and are available on the EBRD website and here:
IFC holds two-day consultation with international Civil Society in Washington
In a two-day consultation meeting with IFC, held on April 18-19, 2005, about forty NGOs presented comments on the draft Performance Standards and Policy for IFC. In preparation for the meeting, civil societyprepared a number of questions for IFC to answer, but to the disappointment of NGO participants, IFC often evaded direct answers or avoided the questions altogether. During the two days, NGOs raised a number of points, including: weakening of existing policies, noting that it is not clear how IFC will carry out its poverty alleviation and sustainable development mandate given that the proposals shift much responsibility from IFC to the private sector clients; and the failure to reflect several Board-approved commitments in the Management Response to the Extractive Industries Review (EIR). To view a complete list of NGO concerns and recommendations see the Civil Society Matrix available at www.grrr-now.org or by clicking here:
World Bank Board of Directors approves revisions to disclosure policy
On March 8, 2005, the World Bank Board of Directors approved a proposal entitled “World Bank Disclosure Policy: Additional Issues Follow-up Consolidated Report (Revised)” on a no-objection basis. This Additional Issues paper was the result of a nearly two-year long process beginning with the Progress Report on Implementation of the World Bank’s Disclosure Policy, sent to the Board in July 2003. At that time, the Board requested that Management prepare a supplementary analysis on the disclosure of Country Assistance Strategies (CASs), Board minutes and final draft documents. The Additional Issues paper includes the final recommendations stemming from the original progress report. The entire Additional Issues paper is available at the following link:
III. Civil Society Activities
WB/IMF Spring meetings: CSO meeting on EIR
The Board of Governors of the World Bank and IMF held their Spring Meetings in Washington, DC on 16-17th of April. NGOs came from around the world to hold strategy sessions, seminars, and special meetings with the institutions as well as to attend some of the official Bank and IMF events. Some of the NGO strategy sessions and seminars included the issues of Extractive Industries Review follow up, the IFC Safeguards review, accountability mechanisms, and Parliamentary Participation. On April 15, 2005 representatives of roughly a dozen NGOs met with the World Bank Group staff to discuss Extractive Industries Review follow up. A brief summary of four main issues arising at the meeting are summarized below:
- EIR commitments are in general being approached in a voluntary manner and have not been made mandatory for IFC clients. EIR commitments that have been taken up are not being applied systematically across all operations and they tend to be on a pilot case basis or determined by client “capacity”.
- The Bank has formed the Extractive Industries Advisory Group, which consists of government, industry, and civil society representatives (4-5 each). All but one or two spots have already been filled for civil society. Representatives of Civil society at the meeting were not aware of this fact and raised a question as to why the WBG did not send out notice about this advisory group, the draft TOR and the nomination process for members, as an element of its follow-up on the EIR management response, at least to all those CSOs who had participated in the EIR process.The final draft Terms of Reference for the Advisory Group is posted on the World Bank’s website and can be viewed by clicking here: Terms of Reference for the Advisory Group , World Bank(Acrobat pdf)
- The Bank Management EIR Annual Progress Report is planned to go to the Board December 2005/January 2006. Currently, there are no plans to have civil society input or to release the report before the Board Discussion.
- IFC-developed poverty indicators appear to be designed to only highlight and track potential positive EI impacts and not to reflect negative effects or social costs. Moreover, the IFC plans to only ask sponsors/clients (i.e. industry) to report on these indicators with no requirement of independent verification of the reporting and data on poverty impacts.
A draft of the IFC’s poverty indicators is posted on the World Bank’s website and can be viewed via the following link:
Comments should be sent to:
For more information about the meeting please contact Heike Mainhardt-Gibbs at hmainhardt@bicusa.org or Jelena Kmezic at jkmezic@bicusa.org.
BIC’s comments on IFC Disclosure Framework
In November 2004, the International Finance Corporation (IFC) released a Framework for Discussion Regarding Disclosure of Information for public comment as part of their Disclosure of Information policy review process. To view this document please click here:
Bank Information Center (BIC) has submitted comments to the IFC on the framework paper. BIC's recommendations focus on strengthening disclosure requirements in three key areas: disclosure principles, procedures and constraints; increased institutional transparency; and increased investment-specific transparency. Between May and September, the IFC will present a revised draft disclosure policy to Management and then to the Board Committee on Development Effectiveness (CODE). The Board will meet in September to discuss the final draft policy for approval. BIC’s comments are available in Russian and English. To read them please click on this link:
Green groups issue advice to EBRD on cleaning up energy investments
Following three public consultations on the new EBRD Energy Policy, Green NGOs’ recommendations highlight the need for positive changes in the EBRD's energy sector lending. The NGOs contend that the long-term goal of the EBRD Energy policy should be to promote and bring about a transition of the energy sector in Eastern Europe and Central Asia from the current dependency on fossil fuels and nuclear energy towards more sustainable energy sources. The public comment period ended in March. Next, it is expected that the new policy will be drafted shortly and then be open for public comment for 45 days before the subsequent adoption of a new policy by the EBRD Board of Directors which is expected to take place in the summer. A complete list of the recommendations supported by seven international and 130 national NGOs can be viewed here:
For a summary of the energy policy consultation workshops provided by the EBRD, please see:
IV. General News and Developments
Contractor of the BTC in Azerbaijan denies allegations
Consolidated Contractors International Company (CCIC), the contractor of the Azerbaijani section of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the South Caucasus Pipeline, has denied allegations issued saying that the CCIC leadership is influencing the political environment and conducting subversive activities in Azerbaijan. The company categorically denied the allegations, regarding them as slanderous, glaringly unfounded and overtly unjustifiable. "CCIC is purely a construction company, which is carrying out transparent and honorable operations and has no direct or indirect links with any political entity and lobby," a source from the company said. (Source: Azernews, April 18, 2005)
Changes in law to give most of additional oil revenues to Stabilization Fund
Currently only 25% of additional revenues acquired as a result of rising world oil prices is transferred to the Stabilization Fund while the rest of the revenues remain at the disposal of the State Oil Company (SOCAR). According to Finance Minister Avaz Alkbarov after changes are made to relevant laws, 75% of the funds will be directed to the Fund and the remaining portion to SOCAR. The additional revenues will be spent on numerous activities and on purchasing equipment from abroad. 50% of the means will be kept in the State Oil Fund and further spent according to the oil strategy, while 25% will be transferred to the state budget. (Source: AssA-Irada News Agency, May 6, 2005)
V. Additional Resources
Previous Updates and related reports can be found on BIC’s website on the Azerbaijan Page. These reports are available in English and in Russian.