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The new generation [ go to first page of report ]

Mr.Heydar Babayev Interview with:

Mr. Heydar Babayev

Chairman of State Committee for Securities.


19 Bulbul ave. Baku
Tel: (99412) 936237
Fax: (99412) 982559
E-mail: azstatecom@yahoo.com

You have been responsible for the creation of the Baku Stock Exchange, which is still
very young. As compared to your forecast at the beginning, how satisfied are you with its
performance so far?

We have a very short history of the market economy. We are trying to establish the modern financial system in Azerbaijan and the securities market as one of the most important part of this system.We are cooperating with the National Bank of Azerbaijan, with the Ministry of Finance and Ministry of Economic Development. As you understand this process can't be passed through in short period of time. But it has to be mentioned that the main part of the basic procedures are already done. We have created the infrastructure of financial service market and especially securities structure in it. In this regard the Baku Stock Exchange has been established and it has a real potential to become a source of development of the securities market in the whole region. There are also financial intermediaries and custodians in the country. As you see the securities market infrastructure in Azerbaijan is now ready for development of investment process. We can mention Russian market as an example. The infrastructure of the securities market was created after the creation of the market instruments in Russia. It caused turmoil in the Russian economy afterwards, and that's why we have chosen another way: we have completed the creation of the legal base for the activities of securities market participants. As the main part of this we have presented to the Parliament amendments to the legislation on securities market and joint stock companies, keeping in mind the recommendation if the EU experts. The main problem is small quantity of instruments in the market at the moment.

When you say the infrastructure in the market is ready it seems like you still in the waiting position for the companies?

You are absolutely right. First of all we are waiting for the creation of the accounting standards which are very important. The Ministry of Finance is preparing some necessary measures in this field. There are about 2000 companies in Azerbaijan at the present time. Providing of transparency of the corporate activity is a necessity for the development of the financial market. Besides this the development of the corporative governance is also very important and some steps have been taken in this regard as well. We hope that the new legislation will be helpful for solving of the given questions. Strategic privatization, of course, can also be of great assistance for achieving our goals.

Major privatizations are still under process. When do you expect the blue chips to appear on the stock market?

The Ministry of Economic Development is in charge of the privatization process in Azerbaijan. Nowadays the level of interest of the foreign investors is not very high. First of all, they are looking for investing in telecommunication and oil industry. But I think in the nearest future the privatization of the telecommunication sector will start and that is very important for the country. Foreign consultants and experts have been invited to Azerbaijan for this process. We are sure that during the second program of the privatization the Ministry of Economic Development will do its best for the successful implementation of the program. We are waiting for the secondary market of the shares issued during the privatization.

You have close cooperation with the NBA and the Ministry of Economic Development.When do you think blue chips should actually start coming into the stock market?

It is difficult to tell exactly right now. We predict it to happen in quite a short period of time, perhaps in the next 3 months. As I mentioned earlier the infrastructure of the market is almost ready. The companies belonging to the Ministry of Communication can be shown as an example-each of them can be easily sold on the stock market. The development of the secondary market is not a problem at all, but the most important thing for the economy of the country is the improvement of the primary market. In this regard it can be very helpful to use the Baku Stock Exchange in privatization process.

How would you explain the BSE evolves as compared to the neighboring countries?

There is no sense to compare Azerbaijan with other countries, because of different levels of economic development. There are no stock markets in Georgia, Armenia and Turkmenistan. Regulatory body in Georgia is created through the USAID, which pays all expenses, created legal base and even established the stock exchange. But the results are not satisfactory. There are some normal companies in Russia. But there is also the risk of turmoil, for example YUKOS-SIBNEFT merger.

To what extent SCS plays a role to get those players?

There are many things to do in this field. As we mentioned some mistakes were made during the privatization program. Due to those mistakes only 10 percent of the companies' shares are circulating on the market. If the companies were able to trade with securities they would realize that it is much more helpful to trade the securities via the Baku Stock Exchange. The most important thing for them is to get some experience. Actually they are making steps in this direction.

And also they may be waiting for others make steps?

The next step for them is to become the participants of the market. It is possible for some of them to establish companies and to get licenses for professional activity. The knowledge of these guys is higher than the knowledge of some dealers working for banks.

How many deals are usually made per day? How can we measure that?

There is only one national depository center. We can observe the deals with the shares. National depository center changes the names of the owners 10 times more often than the deals in Baku Stock Exchange. We know that market is about 30 mln US dollars per month. Unlike FSA in the UK and Securities and Exchange Commission in the USA who only regulate securities markets, our task is to facilitate the creation of the market and then regulate it.

We heard that you have been the representative of the Most-Bank in London. What did you learn from this experience?

Before representing Most-Bank in London I had gained much experience from working for the Bank for Foreign Economic Affairs of the USSR and later the Bank for Foreign Trade of Russian Federation.

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