AZERBAIJAN AND THE OPEC FUND FOR INTERNATIONAL DEVELOPMENT

The OPEC Fund for International Development

The OPEC Fund for International Development (the Fund) is a multilateral development finance institution. It was established in January 1976, by the member countries of the Organization of the Petroleum Exporting Countries (OPEC) following a decision taken in March 1975 by the Sovereigns and Heads of State of OPEC, meeting in Algiers.

The aim of the Fund is to promote cooperation between OPEC member countries and other developing countries and to help particularly the poorer, low-income countries in pursuit of their social and economic advancement.

The following means are applied in assisting the developing and low-income countries:

• Extending concessionary financial assistance in the form of loans for development projects and programs and for balance of payments support;

• Providing grants in support of technical assistance, food aid, research and similar activities, and humanitarian emergency relief;

• Contributing to the resources of other development institutions whose work benefits developing countries;

• Serving OPEC member countries as an agent in the international financial arena whenever collective action is deemed appropriate;

• Participating in the financing of private sector activities in developing countries.

The Fund's resources consist of voluntary contributions made by OPEC member countries, and loan repayments, as well as the accumulated income derived from the Fund's investment and loans. By the end of February 2003, contributions pledged to the Fund by its member countries totaled US$3,439.4 million with some $2,909.5 million paid-in.

All developing countries, with the exception of OPEC member countries, are in principle eligible for Fund assistance. The least developed countries, however, are accorded higher priority and have consequently attracted the greater share of the Fund's resources. So far, 110 countries in Africa, Asia, Latin America, the Caribbean, the Middle East and Europe have benefited from the Fund's financial assistance. The Fund has also cooperated, over the years, with a myriad of multilateral, bilateral, national, non-governmental and other organizations worldwide, joining resources and efforts to assist developing countries.

Cooperation between the Republic of Azerbaijan and the OPEC Fund for International Development (OPEC Fund)

Starting from 2001 a series of meetings between the high ranked officials of the Republic of Azerbaijan and the leadership of the OPEC Fund have been held on several occasions in Baku, in the Vienna based OPEC Fund headquarter as well as in the course of the various international forums. During these meetings the both sides expressed significant interest for closer relations and negotiated the ways to expand cooperation between the OPEC Fund and financial institutions in Azerbaijan.

As a result of these consultations the OPEC Fund has showed its readiness to provide financial support to the Republic of Azerbaijan through financing public and private sector activities in the country.

On November 19, 2002 in at the headquarter of the OPEC Fund in Vienna an agreement for the encouragement and protection of investment was concluded between the OPEC Fund and the Republic of Azerbaijan. H.E. Mr. Farhad Aliyev, the Minister of Economic Development of the Republic of Azerbaijan and H.E. Dr. Y. Seyyid Abdulai, the Director-General of the OPEC Fund signed the agreement.

The document is designed to provide the legal basis for the Fund's Private Sector Facility, through which the Fund will be able to support directly to the private sector in Azerbaijan. The main objective of this convention is to promote economic development by encouraging the growth of productive private enterprise and supporting the development of local capital market in the country.

It is intended that through this agreement the loans will be made to financial institutions for on lending to small, medium and micro-enterprises, as well as directly to specific projects in the Republic of Azerbaijan.

At the same time intensive consultations between the Government of Azerbaijan and the OPEC Fund have been conducted with the purpose of financing different projects prioritized by the Government in public sector. In this framework at the invitation of the Government of Azerbaijan, the representative of the OPEC Fund took part in the Round Table Meeting held in Baku in March 2003. The aim of this meeting was to identify areas of cooperation and to investigate the possibilities of financing development projects in the public sector of Azerbaijan.

As a result of discussions held with the Government Agencies and other national organizations in Azerbaijan the OPEC Fund expressed interest in extending loans for public sector projects. The spheres like road and power plant construction as well as water supply enhancement were identified as most important areas in public sector to be provided by financial support.

The Ujar-Yevlakh Road Project Loan Agreement between the Government of the Republic of Azerbaijan and the OPEC Fund for International Development was signed on February 4, 2004 in Vienna. The loan disbursed under the agreement will be directed towards reconstruction of the Ujar-Yevlakh segment of the highway network of Azerbaijan. The agreement became effective as of June 30, 2004.

The Governing Board of the OPEC Fund at its 110th session held on March 15, 2005 approved  a loan of USD 8.00 million in support of the Samur-Absheron Irrigation System Project in Azerbaijan.

The Samur-Absheron Irrigation System Project Loan agreement between OPEC Fund and Azerbaijan was signed on March 21, 2006 in Vienna.