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. Last Updated: 07/27/2016

Foreign Bidders Flock To Azeri Privatization

BAKU, Azerbaijan -- Foreigners are muscling their way into Azerbaijan's massive sell-off of state enterprises, now in high gear after a lethargic start.


Analysts are upbeat about the privatization program, which had been criticized in some quarters as sloppily prepared.


Interest among foreigners has been so keen that the government has been forced to limit their participation lest they snatch up all the goodies and leave less well-heeled domestic investors holding an empty bag.


"The privatization program is off to a good start despite the dark cynicism of some at the outset," said Tovfik Yaprak, World Bank representative in Azerbaijan.


Azerbaijan has worked steadily since independence from the Soviet Union in 1991, signing contracts with foreign firms to develop its offshore Caspian oil fields. It has so far concluded deals worth $30 billion in long-term investment if they are fully implemented.


But the high level of foreign participation in privatization shows Azerbaijan has the capability to be more than just an oil-dominated economy.


Yaprak said majority stakes in 25 companies have so far been purchased by foreign entities, out of 300 medium- and large-scale companies privatized overall. Eight hundred medium and large firms are to be in private hands by the end of 1998.


Around 70 percent of state property -- which the government estimates is worth $12 billion -- eventually is to be sold off. Small firms like hairdressers and shish-kebab eateries have already been completely privatized, in most cases bought up by their workers.


So far only a small percentage of medium and large firms have been privatized in 10 voucher and seven cash auctions.


Under a complex system, 50 percent of shares in the companies are being sold through a voucher plan, while 35 percent are going for cash and 15 percent are being distributed among workers of the individual enterprises.


The State Property Committee says that 16 million vouchers -- half the total originally distributed to the population -- have been snatched up by foreigners.


Non-resident interest is especially keen in Azerbaijan's agriculture sector, and companies whose shares are on offer in the Nov. 12-27 voucher auction included several meat-packing facilities, a wool textile plant, a sock factory, a toy manufacturer, a poultry frying enterprise, a cold storage food warehouse, and the country's largest department store in central Baku.


Most potential investors, however, are waiting for when and if the really big prizes, such as the oil industry and telecommunications, go up for auction.


"It is not entirely clear what exactly will be sold off and when. A lot of investors are staying on the sidelines until the most attractive investment targets come on line," said one analyst, who wished to remain anonymous.


The law on privatization states that natural resources must stay in public hands. But President Heidar Aliyev has the right to put any enterprise on the block with a stroke of the pen.