U.S. DEPARTMENT OF COMMERCE
OFFICE OF THE COUNSELOR
Embargoed Until 10:00 am September 12, 2000
U.S.-Azerbaijan Commercial Relations:
Issues and Prospects
Jan H. Kalicki
Counselor to the U.S. Department of Commerce
U.S. Ombudsman for Energy and Commercial Cooperation
with the New Independent States
The Fourth Annual Conference of the U.S.-Azerbaijan
Chamber of Commerce
September 12, 2000
Mr. President. Mr. Ambassador. Distinguished Ministers. Esteemed
Good morning and thank you. It is an honor for me to join again
in a forum with President Aliyev, who has done so much for his country
and for U.S.-Azerbaijan relations. And it is a great pleasure to
address again this group. The U.S.-Azerbaijan Chamber of Commerce
along with the AmCham in Baku make for one of the most effective
business association tandems with whom I have had the pleasure to
work. I congratulate you on your efforts to build a strong public-private
sector partnership and on the organization of another excellent
conference and wish Dick Matzke, Galib Mammad and his staff, and
the member companies all the best in your new business offices and
the trade and cultural center in Georgetown.
In my brief remarks this morning, I would like to continue a theme
I began last year and one which will be discussed in detail during
this morning's session: our mutual interest in seeing Azerbaijan
develop a strong, diversified economy and the consequent opportunities
for increased bilateral and regional trade and investment.
The Energy Sector
We recognize, of course, that the energy sector will be the main
engine for economic development in Azerbaijan for the foreseeable
future. Energy projects have brought to Azerbaijan many of our finest
American companies, and in fact, later this morning on
Capitol Hill, President Aliyev will take the next step in commercial
cooperation to develop Azerbaijan's energy resources when he witnesses
the signing of a new Production Sharing Agreement with Moncrief
While these are the kinds of deals that naturally make headlines,
I have another headline for you this morning that has not received
public attention. Last year for the
first time our official trade statistics picked up Azerbaijani oil
imports to the U.S. in the order of $20 million. This fact
also deserves due recognition as an indicator of how far Azerbaijan's
development and our bilateral commercial relationship have come.
Azerbaijan's energy future
also depends on energy pipelines and transportation. Yesterday Ambassador
Wolf provided an overview of all our Administration is doing to
promote our shared energy interests in the region. I would only
like to add here that pipeline development itself also represents
additional commercial opportunities and that, simply put, it is
our intention to help ensure that U.S. companies remain deeply involved
in this process. Deepening our mutual partnership in energy at every
level remains a key goal for all of us.
Diversification and Commercial
That said, our concern about neither
wasting nor over-relying on petroleum resources is very real and
based on international experience. Venezuela, and particularly Nigeria
and Angola, are examples of oil-rich countries where the majority
of the population lives in extreme poverty. Last month the New York
Times chronicled in several articles the dangers in these countries
of oil "asphyxiat[ing] the rest of the economy and leading [citizens]
to believe that if they are not rich, it is because someone has
stolen what belongs to them."
The fundamental key to non-oil sector
economic growth, over which the Azerbaijani government has control,
is the country's commercial environment. Companies, especially new
to market firms, must be confident that they will be treated fairly
and that there will be stable, predictable conditions for business.
In this regard, Azerbaijan's progress since we gathered here in
Washington last year offers some good news, but to be honest, since
we are among friends, some not so good news.
On the one hand, the government --
to its credit -- has maintained macroeconomic stability, created
new market and pro-investment institutions, and taken steps to address
specific company cases. More generally, it is our sense that reliable
rules of the game are emerging for doing business in Azerbaijan.
In the future, Azerbaijan's new oil fund can help to catalyze economic
diversification and new investment.
On the other hand, we are still concerned
that these rules are not sufficiently transparent to encourage potential
new business development. In short, rules of the game need to be
consistent with rule of law -- including upholding contracts and
shareholder rights. We should therefore not be surprised that foreign
investment, even counting for the cyclical nature of energy investment,
is running only a half of what it was in 1999 through the first
seven months of this year, and U.S. exports to Azerbaijan continue
The Commercial Ledger
Let us take a closer look at some
of the developments of the last year and look ahead to opportunities
to advance our commercial relationship in the year ahead.
On the positive side of the ledger,
we applaud the continued productive, on-the-ground dialogue between
key agencies in the Azerbaijan government and the Amcham and U.S.
embassy to address business and investment climate issues. The new
tax code (to go into effect on January 1), which is far more rational
and business friendly than its predecessor, is a concrete result
of this dialogue.
The establishment of a stock exchange
and a State Securities Committee under Chairman Babayev further
demonstrates Azerbaijan's commitment to build a modern economy.
We also strongly support the creation of a one-stop shop for investors
in the form of a Foreign Investment Agency, which we know you are
contemplating. With all of these new institutions, the real challenge
is to make them function effectively. While Section 907 regrettably
prevents the U.S. government from providing financial assistance,
we look forward to consulting with you on the development of these
new institutions and will urge the donor community and private sector
to support them with training and other assistance programs.
Now, a few words about some of the
problems. Unfortunately, corruption is still a major problem in
Azerbaijan as in other countries. We greatly welcome the June 8
Presidential Decree on anti-corruption, but - as we like to say
- actions speak louder than words. We understand that combating
corruption is not a simple matter, but a lot is at stake. In addition
to the moral and social implications, corruption can only harm Azerbaijan's
reputation in business circles and jeopardize long-term, sustainable
Commercial bribery is the
flip side of government corruption and must also be curbed. The
U.S. government has made the fight against corruption a top priority
in our laws, policies, and work with the international institutions.
In this regard, let me renew our Department's offer to work with
the Chamber and others to develop guidelines for business codes
of ethics, based on a model that we have developed in cooperation
with the OECD.
Privatization and Standards
As we look ahead, our focus turns
to the long awaited second privatization program of Azerbaijan's
blue-chip companies. I am sure that many of you are anxious to hear
details of the new program from Minister Aliyev later this morning.
With the vouchers having been extended this summer, the stage is
set and the time is now. If done correctly, privatization can serve
as a catalyst for the entire economy providing capital inflow and
management know-how into Azerbaijan's companies. Investors will
be scrutinizing the program closely for opportunities and pitfalls.
I am confident that the program can be a win-win for investors and
Azerbaijan and I urge the government to continue work with the investor
community to make privatization a success.
In addition to large enterprise privatization
and pipeline and transportation infrastructure projects, we continue
to believe that there are commercial opportunities in agribusiness,
construction, and tourism. Indeed, I am very pleased to bring to
your attention this month's BISNIS bulletin which is devoted to
commercial opportunities in the Caucasus and to note TDA's reverse
trade missions in agribusiness and construction later this fall.
I also want to mention the U.S.-Caucasus Business Development Conference,
which is scheduled for the end of this month in Istanbul and has
been organized by our embassies in the region. Over a dozen Azerbaijani
firms, along with business people from Georgia and Armenia, will
come together to meet with U.S. companies operating in Turkey to
discuss concrete commercial projects.
In addition, I would like to mention
our Standards Dialogue in the Caucasus. The Dialogue, under which
our Department will support a regional seminar in Tbilisi later
this fall, is intended to promote adoption of international norms
and regional harmonization in standards and certification, and I
greatly appreciate the support of Presidents Aliyev, Shevardnadze,
and Kocharian for this initiative. By improving market access and
lowering barriers to trade, the Dialogue will enhance our support
for regional markets in the Caucasus and beyond to the Silk Road
Finally, I want to acknowledge Michael
Lally, our new Senior Commercial Officer in Baku. Simply put, Michael
is one of our best officers, with extensive experience in the former
Soviet Union. I am sure that you will find him a great advisor and
advocate and encourage all of you, who have not already had the
pleasure, to introduce yourself to him.
We are as committed as ever to Azerbaijan
and to the development of our bilateral commercial relationship
in both the oil and non-oil sectors. We are excited by the new prospects
offered by privatization and the further development of Azerbaijan's
economy. We also wish you good and fair parliamentary elections
in November. While we share your frustration with Section 907 and
will continue to urge Congressional repeal, our governments and
private sectors have developed a strong bond. Let's keep building