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Foreign investment Under Privatization Programs in Azerbaijan.

AzerbaijanUnder the Privatization Law, the following are considered to be foreign investors: • Foreign legal entities and their subsidiaries; • Azerbaijani legal entities in which participation of foreign investment exceeds 50% of the entity's charter capital; • Foreign nationals; and • Stateless persons.

Azerbaijan to the moment has undergone long process of getting from a state dominated economy to the current situation with 75% of economy being in private hands. This became possible largely thanks to de-nationalization of the state owned enterprises and property. Privatization went in two stages. Denationalization of small sized enterprises was carried out within the First Stage Privatization Program (1995-1998). 26,000 enterprises as well as 1.3 million hectares of land were sold and distributed to private persons and legal entities. Few large enterprises were also sold to investors as part of the Program. They include, among others, brewery, cement and steel plants transferred to foreign investors.

At the moment the Second Stage Privatization Program adopted in 2000 is underway. It stipulates privatization of mainly medium and large enterprises.

The enterprises are declared "open for privatization" by special Decrees signed by the President. The list of enterprises currently open for privatization is publicly available.

The law also contains the list of exemptions, i.e. enterprises that can not be denationalized. Such enterprises include military and other facilities of strategic importance. Railways, radio and TV stations, irrigation systems are excluded from the privatization as well.

The programs explicitly do not mention any difference as regards to who may participate in privatization, i.e. foreign national takes part in the process on a non discrimination basis.

The State Committee on State Property Management is in charge of privatization process. There are few privatization methods legally adopted in Azerbaijan:

- direct sale to strategic investor;
- sale at the investment tender;
- special cash and voucher auctions;
- general auctions;
- sale to employees on preferential terms.

The Government also practices long term transfer of management to a private operator in accordance with an obligatory investment program. To the moment the number of medium and large enterprises privatized within both Privatization programs is over 1,000. There are, however, still very substantial opportunities in privatization as a mode of entry to the market.
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Posted on Tuesday, February 13 @ 09:45:31 MST
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