Azerbaijan and ADB

ADB's Work in Azerbaijan

Azerbaijan joined ADB in 1999. ADB operations in Azerbaijan was guided by the country partnership strategy (CPS), 2014–2018, which supported the diversification of Azerbaijan’s economy, fostering of new economic opportunities, promotion of inclusive growth, and reduction of disparities between urban and rural areas.

A country diagnostic study conducted in 2018 identified short-, medium-, and long-term growth constraints faced by Azerbaijan, and suggested priority reforms to address such constraints. The next CPS for Azerbaijan (2019–2023) has been prepared for endorsement in 2019. It will support acceleration of economic diversification and inclusive growth through the implementation of three pillars: (i) boosting private sector development, (ii) raising public sector efficiency, and (iii) improving infrastructure and strengthening human capital.

Loans has enabled small bussinesses a chance to develop and grow

ADB’s country operations business plan, 2019–2021 is aligned with the Government of Azerbaijan’s Strategic Roadmap on the National Economy Perspective adopted in December 2016. ADB’s indicative sovereign lending program for Azerbaijan over the plan’s period totals $815 million.

Cumulative loan disbursements to Azerbaijan amount to $3.09 billion. These were financed by regular and concessional ordinary capital resources.

ADB has helped construct approximately 325 kilometers of new and upgraded highways and rural roads in Azerbaijan. In the Agstafa and Gazakh districts, ADB-supported projects have improved road connectivity for 16 villages (with a total population of 20,500 people) through the rehabilitation of 41.3 kilometers of rural roads and the reconstruction of four bridges. The rehabilitated rural roads significantly reduced travel time and vehicle maintenance costs while enabling the local communities to have all-season and easy access to schools, markets, and health facilities. Taxis (charging reasonable fares) started operating in the villages and village traffic patterns improved.

Road Construction in Hadjegabra-Kurdamir Region

ADB has also invested in improved power distribution to deliver energy more reliably and reduce power outages across Azerbaijan. It has helped increase the availability of reliable electricity supply to more than 100,000 consumers in 13 regions and 3 cities, with 90% of consumers being households.

The $250-million Improving Governance and Public Sector Efficiency Program (subprogram 1)— the first-ever programmatic policy-based operation—together with the forthcoming subprogram 2, helps the Government of Azerbaijan introduce rule-based fiscal planning, improve centralized monitoring and control of state-owned enterprises (SOEs) while raising corporate governance standards, initiate effective restructuring of SOEs, and improve the country’s business environment and private sector participation prospects.

The ongoing $400 million Railway Sector Development Program is helping to rehabilitate the tracks and structure of the Sumgayit–Yalama rail line. The program also facilitates railway sector reforms, including the corporate governance, operational efficiency, and financial sustainability of the Azerbaijan Railway Company.

Constructing a railway line from Poyle to Salakhle

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments from ADB’s own funds (in equity and direct loans) in 2018 amounted to $3.14 billion for 32 transactions in economic and social infrastructure, the finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2018, ADB mobilized $3.17 billion of long-term cofinancing and $3.99 billion of cofinancing in trade finance, microfinance, and supply chain finance programs. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $12.7 billion as of 31 December 2018.

Cofinancing

ADB began cofinancing operations in Azerbaijan in 2002. Since then, cumulative direct value-added official cofinancing commitments for Azerbaijan have amounted to $102.5 million for two investment projects and $2.72 million for six technical assistance projects. Cumulative DVA commercial cofinancing for Azerbaijan has amounted to $1.1 billion for six investment projects.

In 2018, Azerbaijan received $100 million in loan cofinancing from AFD for the Railway Sector Development Program.

Projects Cofinanced, 1 January 2014–31 December 2018

Operational Challenges

A performance evaluation of country assistance, conducted in 2018, rated ADB’s operations in Azerbaijan from 2011 to 2017 as successful.

The active ADB public portfolio in Azerbaijan comprises seven projects totaling $1.55 billion, of which 58% is in transport, 9.7% is in water supply and sanitation, and 16.15% is in each of energy and public sector management.

ADB and the government have been working closely to strengthen the country’s environmental and social safeguards systems; ensure compliance with standard ADB practices in procurement, financial management, and anticorruption initiatives; and incorporate gender equality measures into relevant development projects. Special attention is paid to strengthening the governance and institutional capacities of implementing agencies as well as to promoting the economic and financial sustainability of investments.

Future Directions

To support Azerbaijan’s Strategic Roadmap on the National Economy Perspective, ADB assistance in the short to medium term will include investments in public sector management, transport (railways), energy, human capital, and private sector development.

In public sector management, ADB will continue to help improve Azerbaijan’s public financial management framework, raise the efficiency of public sector institutions and strengthen private sector participation in the economy, including through public-private partnerships. ADB will prioritize the development of transport corridors to boost the country’s connectivity. It will also promote the increased use of renewable energy, enhance the energy sector’s financial sustainability, and improve the power distribution network.

As businesses ramp up operations, job opportunities are offered to women and other members of the community who are socially disadvantaged

While remaining responsive to market demand, ADB’s private sector operations will look for opportunities to engage in projects related to trade, finance, small and medium-sized enterprise expansion, and infrastructure development. ADB will also seek to improve the environment for small and medium-sized enterprises by enhancing Azerbaijan’s regulatory framework and establishing alternative financing instruments to expand access to finance.

ADB’s increased knowledge work will focus on targeted policy advice, knowledge sharing, and economic analysis to help address the constraints to inclusive growth in Azerbaijan.