VZCZCXRO6829
RR RUEHLN RUEHVK RUEHYG
DE RUEHKB #0132/01 0441138
ZNR UUUUU ZZH
R 131138Z FEB 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 4757
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2638
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 BAKU 000132 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/CARC 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
ANKARA FOR FCS 
COMMERCE FOR 4231 ITA/MAC/ORUE FOR DSTARKS 
COMMERCE FOR 3004 ITA/FCS/ ADVOCACY FOR ACHAMS-EDDINE 
 
E.O.  12958: N/A 
TAGS: ECON EINV ETRD ENRG EFIN AJ
SUBJECT: AZERBAIJAN COMMERCIAL UPDATE, January 15, 2008 - January 
31, 2008 
 
¶1. SUMMARY: This information is drawn primarily from the 
Azerbaijani local press, and has not been checked for accuracy.  The 
opinions and policies expressed in this report are those of the 
authors, not the U.S. Government.  END SUMMARY. 
 
- VAT RATE MAY BE REDUCED 
- KAPITAL BANK TO BE FULLY PRIVATIZED 
- MASALLI-ASTARA HIGHWAY TO BE RECONSTRUCTED 
- ADB TO FINANCE GANJA BYPASS 
- PUBLIC UTILITIES RECONSTRUCTION PROJECTS 
- CASPAR BUYS A NEW RUSSIAN TANKER 
- "KHAZARINVEST" TO MANAGE POWER DISTRIBUTION 
- AZERIGAS AND SOCAR TO BUILD GAS-PROCESSING PLANTS 
- AZERBAIJAN TO IMPORT MERCEDES TAXI CABS 
- AZERENERGY TENDER FOR ELECTRICITY TRANSMISSION LINE 
- CASPIAN OIL FLEET TO HAVE THREE SHIPS REPAIRED 
- BAKU SUBWAY TENDER FOR NASIMI STATION 
 
¶2. VAT RATE MAY BE REDUCED 
-------------------------- 
 
The Minister of Taxation announced possible plans to lower the value 
added tax (VAT) in 2009.  The current VAT rate is 18 percent. 
 
¶3. KAPITAL BANK TO BE FULLY PRIVATIZED 
-------------------------------------- 
 
The Azerbaijani State Property Committee announced an auction to 
sell 85 percent of the remaining 50 percent state shares in Kapital 
Bank.  Offers will be accepted until March 31, 2008, with evaluation 
carried out on April 3, 2008.  The remaining 15 percent of the 50 
percent state shares will be sold to the staff of the bank.  In 
2007, three local businesses won the auction for the first 50 
percent of state shares: Khalg Bank and ATA Bank each got 20 
percent, and AzerSun Holding bought 10 percent.  After 
privatization, the International Bank of Azerbaijan will remain the 
only majority-state-owned bank in Azerbaijan. 
 
¶4. MASALLI-ASTARA HIGHWAY TO BE RECONSTRUCTED 
--------------------------------------------- 
 
The Government of Azerbaijan and the Asian Development Bank (ABD) 
signed a lending agreement for USD 200 million to finance 
reconstruction of the 59-km Masalli - Astara highway. This is part 
of the USD 500 million multi-tranche finance facility the ADB Board 
of Directors approved in September 2007.  The Ministry of 
Transportation will be the customer with the state "AzerYolServis" 
roads agency executing the project.  The new four-lane highway will 
be 27.5 meters wide. 
 
¶5. ADB TO FINANCE GANJA BYPASS 
------------------------------ 
 
ADB and the Ministry of Transportation have reached a preliminary 
agreement to expand funding of the highway projects to add USD 50-60 
million for the Ganja bypass.  Reconstruction of the Ganja bypass 
will be a part of the Ganja-Georgia highway, reconstruction of which 
is expected to be launched in the near future. 
 
¶6. PUBLIC UTILITIES RECONSTRUCTION PROJECTS 
------------------------------------------- 
 
The state water utility AzerSu has announced government plans to 
reconstruct the water utility infrastructure in 10 regions: 
Ali-Bayramli, Barda, Neftchala, Salyan, Khachmaz, Yevlakh, Khizi, 
Gusar, Gobustan, and Naftalan. The project will be co-financed by 
the Japan Bank for International Cooperation (JBIC).  A Japanese 
consultant has completed feasibility studies for five regions.  The 
remaining feasibility studies will be financed by a JBIC grant. 
AzerSu expects construction works to last from 2008 through 2012. 
AzerSu also plans to upgrade water utility systems of many other 
regions, a project to be financed with a World Bank loan. 
 
¶7. CASPAR BUYS A NEW RUSSIAN TANKER 
----------------------------------- 
 
Russian Nizhegorod Shipbuilding Plant signed a contract with the 
Caspian Shipping Company (CASPAR) to build a new oil tanker.  The 
tanker will be delivered in October 2008.  The new tanker will be 
used to transport oil and oil products. The Nizhegorod Shipbuilding 
 
BAKU 00000132  002 OF 002 
 
 
Plant also built the "Heydar Aliyev," "Babek," "Shah Ismayil 
Khatai," "Koroghlu," and "Dede Gorgud" tankers, delivered in 2006. 
 
¶8. KHAZARINVEST TO MANAGE POWER DISTRIBUTION 
------------------------------------------- 
 
The local "KhazarInvest" won a tender by the State Property 
Committee to the manage electrical power distribution networks of 
the cities of Sumgayit and Sheki.  Khazarinvest committed to invest 
AZN 85 million into the Sumgayit network and USD 11 million into the 
Sheki network, to maximize collection and to fully pay for the 
energy it will buy from the state monopoly "AzerEnerji."  Unlike 
previous arrangements (the now-defunct Turkish-Azerbaijan joint 
venture "Barmek"), the Government will keep the ownership of assets. 
 Khazarinvest will manage the networks for five years with an option 
to extend the contracts afterwards. 
 
¶9. AZERIGAS AND SOCAR TO BUILD GAS-PROCESSING PLANTS 
--------------------------------------------- ------ 
 
The state owned "AzeriGas" and SOCAR are discussing plans to 
cooperate and install new equipment and build mini gas-processing 
plants in Azerbaijan. 
 
¶10. AZERBAIJAN TO IMPORT MERCEDES TAXI CABS 
------------------------------------------- 
 
The Ministry of Transportation announced plans to import three 
thousand two hundred S-class Mercedes cabs to Baku.  The first 
shipment will include six hundred cars.  All cars will be equipped 
with meters and GPS devices and will be connected to the new 
intelligent traffic control system the Ministry is planning to 
install in Baku.  Once vehicles are delivered, the Ministry of 
Transportation will request the Tariff Council to set meter rates. 
 
¶11. AZERENERGY TENDER FOR ELECTRICITY TRANSMISSION LINE 
--------------------------------------------- ---------- 
 
Azerenergy JSC has invited bids to choose a contractor for the 
AzTES-Imishli electricity transmission line, a project of KFW (a 
German bank).  The line (180 km long) will be 330 kilovolts.  It 
will connect the Azerbaijan Thermoelectric Power Station (AzTES) 
with the district center of Imishli, whose electricity substation 
will be repaired and upgraded. The bids will be unsealed on February 
29 at 15.00.  For more information contact at: 530-11-67 or 
490-09-83. 
 
¶12. SOCAR TENDER FOR SHIP REPAIRS 
--------------------------------- 
 
The SOCAR Oil Fleet invites bids to receive equipment and spares to 
repair the General Assadov, Kur and Chinghiz Mustafayev ships.  The 
office is at 13 Khojaly Avenue, Baku. Deadline: February 28, 2008. 
The bids will be unsealed on March 7 at 11.00.  For more information 
contact at: 490-20-26. 
 
¶13. BAKU SUBWAY TENDER FOR NASIMI STATION 
----------------------------------------- 
 
The Baku Underground has announced a public tender for overland 
groundwork at the Nasimi Station under construction at Mammadova 
Street. The application deadline is February 21. Candidates should 
submit their bids by February 29. The bid opening will be held on 
March 3. The contact number is (+994 12) 490-02-46. First opened in 
1967, the Baku Underground now operates 20 stations. 170 million 
people have used Baku underground Metro through the past 5 years. 
 
DERSE