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Azerbaijan: Role Reversal At An Investment Conference

Washington, 22 May 1998 (RFE/RL) -- Officials of Azerbaijan found themselves in a very unusual situation at a Washington conference promoting trade and investment in the Central Asian nation Thursday -- they were the ones urging caution and the private investors were doing the cheerleading.

Azerbaijani Prime Minister Artur Rasizade opened the conference sponsored by the U.S.-Azerbaijan Chamber of Commerce with a standard outline of the progress his country has made in its transition to a market economy.

He and Minister of Economy Namig Nasrullayev said that while Azerbaijan's massive oil and gas wealth would be the "engine" pulling the country's economy, it was very important not to become dependent entirely on petroleum revenues.

Baku wants to take advantage of its geographic position as the crossroads between Asia and Europe, the CIS and Europe, and as the major transit point from Caspian sea energy to develop both the oil and non-oil parts of its economy.

They noted that the moribund chemical industry could be developed to good advantage, the metallurgy sector could be grown, telecommunications could be an important industry, agriculture has tremendous potential and electronics manufacturing holds a lot of promise.

But the Prime Minister said officials are worried about continuing levels of joblessness as well as the poverty of many of the country's citizens. Demographic changes brought about by an aging population, like most places in the world, indicate trouble ahead in having the numbers of skilled workers needed in the next half century or more.

Their encouraging but somber assessment of Azerbaijan's economic prospects was in contrast with the assessments made by bankers and private investors -- the people who are usually splashing cold water at such conferences.

"There is a buzz, an excitement going on in Baku," said Jean Facon, head of emerging markets at the J.P. Morgan investment banking firm. "Investors are learning very quickly about the region," he said, and are now far more interested in resource rich countries like Azerbaijan and Kazakhstan than they are in Russia, which he said is "more influenced by political developments."

Azerbaijan deserves better international recognition for its economic achievements and political stability, said Facon. When it's achievements are better recognized in the markets, investment money will pour in, he said.

Bank of New York Vice President Naslihan Tombul could hardly contain her enthusiasm. "No doubt Azerbaijan has secured its rightful place in the world order, the country's success, particularly during the last two years, has been remarkable."

She said Azerbaijani officials are taking the right road by pushing to take full advantage of their oil reserves, but understanding it is essential to shield the country from dependence on one commodity whose price can fluctuate widely on world markets. "Free markets are unforgiving and don't tolerate mistakes," she said, so Azerbaijan must have "contingency plans" and make sure it is harmonized with global capitalist systems.

Michael Delia, who heads the country team for the Balkans and the Caucasus regions at the European Bank for Reconstruction and Development (EBRD), enthused that all business people and investors who have discovered Baku can only speak in superlatives -- the best place, the best growth rate, the lowest inflation. "Everyone talks about oil wealth -- it is coming and it will be there," he said. But it's not there yet and there is a lot to be done in the meantime. Reform efforts must continue strongly, privatization is not going fast enough for everyone's taste, and there is still need to refine and improve the legal and business environment.

For now, Delia said, the EBRD is focusing on the areas where the private sector is not yet interested or can't handle the demands, mostly in what he called "enabling infrastructure."

For example, the EBRD will be putting up $45 million to upgrade rail links between Azerbaijan and Georgia. With matching loans to fix the rails in Georgia and Turkmenistan, the EBRD hopes to have an upgraded rail link between the Caspian and Black Seas in place within the next 18 months.

That ties in with the projected oil pipelines, and with other efforts at improving port facilities, all of which will make Azerbaijan's position as central transit point even more important.

When the private sector really does move he, said Delia, the EBRD knows it will be quickly pushed aside.