SUMMARY: This information is drawn primarily from local Azerbaijani press and highlights non-oil-and-gas sectors.  U.S. Embassy Baku has reviewed the information below, but cannot confirm or verify the accuracy of the data.  The opinions and policies expressed in this report are those of the authors, not the U.S. Government.  END SUMMARY.

- 2008 - 2013 BUSINESS DEVELOPMENT PROGRAM
- INFLATION DATA
- NEW FOOD SECURITY PROGRAM TO BE DRAFTED
- GRAIN AND FLOUR IMPORTS ARE TAX AND DUTY FREE
- WTO PROGRESS REPORT TO BE PREPARED
- KFW TO HELP AZERBAIJAN DEPOSIT INSURANCE FUND
- FRENCH CNIM TO BUILD A WASTE PROCESSING PLANT
- GANJA TO BUILD A GARBAGE PROCESSING PLANT
- AZERBAIJAN PLANS A NUCLEAR POWER PLANT
- JBIC TO FINANCE WATER SUPPLY PROJECTS
- RAIL ROAD INVESTMENT PROPORALS
- BAKU PORT CONSTRUCTION TO TENDER IN 2009
- BALTIKA BUYS BAKU CASTEL
- CASPIAN SHIPBUILDING FACTORY TO BE BUILT
- USD 150 MILLION FOR ENVIRONMENT PROGRAM
- WORLD BANK FUNDED WATER PROJECT OPPORTUNITY

2008 - 2013 BUSINESS DEVELOPMENT PROGRAM
The Cabinet of Ministers is reviewing the draft of the new Business Development Program for 2008 - 2013. The draft incorporates feedback from the GTZ (German Technical Assistance Society), AMCHAM (American-Azerbaijan Chamber of Commerce & Industry), European Union’s TACIS Program, the United States Agency for International Development (USAID), and other international organizations. This is the third business development program for Azerbaijan; the first two were developed to foster small and medium business development.

INFLATION DATA
The Economic Research Center of Azerbaijan with support from the United States Agency for International Development (USAID) published a new research on 22 Azerbaijani regions. According to the report, prices have risen 26.41 percent since April 2007. International Monetary Fund (IMF) in its forecasts predicts inflation for Azerbaijan at 22 percent in 2008 and 20 percent in the long run. The Government recently forecast this year’s inflation at 19 percent.

NEW FOOD SECURITY PROGRAM TO BE DRAFTED
The President signed a decree ordering the Cabinet of Ministers to prepare a new food security program within three months. The program is aimed at ensuring food safety and security and should include a range of actions to promote agricultural production in Azerbaijan.

GRAIN AND FLOUR IMPORTS ARE TAX AND DUTY FREE
Cabinet Ministers exempted grain and flour imports from customs duties and taxation. Minister of Economic Development Heydar Babayev related this decision to a global grain price increase.

WTO PROGRESS REPORT TO BE PREPARED
The World Trade Organization (WTO) Secretariat will prepare a factual summary about Azerbaijan’s progress in the process of accession to the WTO by August – September 2008. Azerbaijan so far has signed bilateral protocols with Turkey, Oman and UAE. Protocols are expected to be signed with Kyrgyzstan and Moldova soon. Talks with Ecuador, Sri Lanka, India, and Georgia are under way. Azerbaijan recently held bilateral talks with US representatives and is planning for bilateral talks with the EU this July in Brussels. Azerbaijan has been an observer to the WTO since 1997.

KFW TO HELP AZERBAIJAN DEPOSIT INSURANCE FUND
The German Kreditanstalt für Wiederaufbau (KfW) hired Global Banking Development Solution (Germany) to provide technical assistance to the Azerbaijan Deposit Insurance Fund (ADIF). KfW expressed readiness to endorse a EUR 5 million loan for ADIF’s capitalization and a EUR 1 million grant for its institutional development. ADIF was founded on August 13, 2007. Thirty seven out of the 46 domestic banks subscribe to the Fund. Its capitalization has already reached AZN 5.5 million. ADIF has also announced plans to place its assets into AAA-rated securities overseas and will soon seek an institutional broker.

FRENCH CNIM TO BUILD A WASTE PROCESSING PLANT
The Ministry of Economic Development of Azerbaijan is completing negotiations with the French CNIM to construct the first garbage-processing plant outside of Baku. Competition also included EVN (Austria), Enconi (Germany) and Mosekostroy/Mossptsstroy (Russia). According to the Minister of Economic Development Heydar Babayev, a Presidential decree on waste management is to be signed soon and a state-owned company called “Clean City” would be established in Baku to manage, collect and utilize waste (about 800,000 tons a year). There are three landfills around Baku and one of them will be transferred to the plant.

GANJA TO BUILD A GARBAGE PROCESSING PLANT
Ganja City Executive Authorities selected the French HEF International to build a waste-processing plant outside the second largest city. Construction of the plant with an annual processing capacity of 150,000 tons will take three years to complete and will cost AZN 100 million.

AZERBAIJAN PLANS A NUCLEAR POWER PLANT
Azerbaijan plans to conduct a feasibility study, establish and staff the regulating authority, and select a location for a nuclear power plant with an expected reactor capacity of 30 – 35 MWt in 2009 - 2011.

JBIC TO FINANCE WATER SUPPLY PROJECTS
Japanese Bank for International Co-operation (JBIC) and the Azerbaijani government are completing negotiations for a water supply & sewage project in secondary towns of Azerbaijan. JBIC has already submitted a draft USD 260 million loan agreement. The JBIC project consultants are Tokio Engineering (Japan) and ASPI Engineering (Azerbaijan), and they recommended the Bank increase project cost from USD 160 million to USD 260 million. Total cost of the project is estimated at USD 310 million and will cover Khachmaz, Barda, Alibayramli, Salyan, and Nefchala. to cover Khachmaz, Barda, Alibayramli, Salyan, and Neftchala is estimated at USD 310 million.

RAIL ROAD INVESTMENT PROPOSALS
The Ministries of Transport, Finance and Economic Development are reviewing various investment proposals to modernize state railroads. The European Bank of Reconstruction and Development (EBRD) and Asian Development Bank have expressed interest to lend USD 500 million for reconstruction of the Russia-Baku-Iran (North-South) transport corridor within the State Railway Development Program for 2008-2012. The East – West railway segment will be financed by the World Bank Group (USD 450 million) and the Japanese Bank for International Development (USD 260 million). German bank KfW has expressed readiness to participate in financing of the incorporation of the Azerbaijani State Railroads. The State Rail Road Program is estimated to cost more than USD 1.5 billion.

BAKU PORT CONSTRUCTION TO TENDER IN 2009
The Azerbaijani government claims to have toughened requirements for the feasibility report for the new Baku Sea International Trade Port that is to be constructed in the Alat settlement, Garadagh district of Baku. The Government has contracted the South Korea’s GSE & Construction to conduct the studies. The Ministry of Transport has launched preparations for a tender procedure to design the new port, after which a construction tender will follow. The Government plans to use its own funds and will discuss co-financing with the World Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and other international entities.

BALTIKA BUYS BAKU CASTEL
The Russian “Baltika” Brewery of the Carlsberg Group of Companies has announced plans to buy the “Baku Castel” brewery. The deal is pending approval by the Azerbaijan antimonopoly authorities. “Baltika” estimates beer consumption to grow by 12 – 15 percent in the next three years. The new owners plan to continue brewing local brands and also to establish production of some Baltika brands with future plans to export to the southern regions of Russia, Turkmenistan, Georgia and other countries. The Baku brewery is Baltika’s first outside of Russia.

CASPIAN SHIPBUILDING FACTORY TO BE BUILT
The State Oil Company of Azerbaijan Republic (SOCAR), the Korean STX and the Azerbaijan Investment Company (AIC) signed a Memorandum on the creation of the Caspian Shipbuilding Plant (CSP). Founders pledged to acquire 65, 25, and 10 percent in the CSP respectively. Under the primary feasibility study, construction of the CSP is estimated to cost USD 400 million. STX is expected to undertake project management and construct the plant.

USD 150 MILLION FOR ENVIRONMENT PROGRAM
World Bank Group (WBG) and the Azerbaijani government have completed official negotiations on a joint Environment Program, which envisions assistance to the Ministry of Emergency Situations for modernization of landfills of radioactive waste for two iodine producer enterprises in the Surakhani and Ramani settlements of the Absheron Peninsula, clean-up of an 800-hectare territory adjoining the Heydar Aliyev Baku International Airport, technical assistance to the Ministry of Environment and Natural Resources to develop and apply a new set of national environmental in-line with EU standards, and assistance to the State Oil Company for ground cleaning and development of corporate environmental standards.

WORLD BANK FUNDED WATER PROJECT OPPORTUNITY
The Government of Azerbaijan announced tender to drill artesian wells, construct check dams, and restore irrigation canals, drainage boundary plants, pump-stations and water pipelines in a number of regions throughout Azerbaijan. Tender documents should be submitted to 69A Moscow Ave, Baku, Azerbaijan. Contact phone: +994 12 430-34-81, 430-79-57.