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Before the end of the crisis, it is still far away (Continuation-3)

Before the end of the crisis, it is still far away (Continuation-3)


2017 April 02 ( Sunday )  15:11:30
Print version
Русский Azərbaycan

INFRASTRUCTURE. Over the past decade, much has been done in Azerbaijan to develop infrastructure. At different times, different emphasis was put on the development of infrastructure. At one time, the government focused on electric power. Then large-scale projects began in road construction, in water supply. In general, it may seem that the key infrastructure problems of the country are solved. It already quite actively supports the entire economy, and its individual problems are quite solvable.

Against the backdrop of such a complacent assessment of the state of the infrastructure, it would be worthwhile to pay attention to the recent report of the Meeting Asia's Infrastructure Needs for 2016-2030, published by the Asian Development Bank. It notes that the decrease in the density of Azerbaijan's railways has reached 0.2 kilometers per 1,000 square kilometers of the country's territory. The bank links this to the aging and failure of previously constructed railways. It estimates the quality of such roads at less than 4 of the 6 possible points. At the same time, electricity generation increased by 1.9 kilowatts per capita, and energy losses in transmission and distribution networks were estimated at 15%, almost the same level as at the beginning of the two thousandths. The bank also noted an annual increase in the density of the water supply network by 0.5 km per 1,000 square meters in the cities and by 1.9 square km in the regions, and the sewage network - by 1.2 and 3.3 square km, respectively.

There are sectors of infrastructure that are capable of immediate benefit. These include, for example, the housing market. The development of this market from a macroeconomic and social point of view is difficult to overestimate. At the same time, the standard share of household consumption is 65-70% of GDP. The cost of housing and its servicing is around 25% of the household expenditure globally. This market has been sinking in Azerbaijan for last  several years in a row on the background of growing financial problems. Of course, this market does not bring much needed currency to the country today, but it continues to be one of the engines for GDP growth. Back in April 2016, the government created the State Agency for Housing Construction to stimulate the construction of social housing. The first complex of buildings is already ready and starting from May the preferential sale of these apartments will begin. But the most interesting thing is that the agency invited private construction companies to partnership. In conditions of stagnation for construction companies, this is an opportunity to make a profit. It is possible, because the state provides ready land plots for construction and itself brings infrastructure, and this is a significant reduction in construction costs. If this happens, then this will be the first case of public-private partnership in infrastructure projects.

The month is marked by one more event. Exactly ten years ago in February, a presidential decree was signed to finance the construction of the Baku-Tbilisi-Kars railway. In these years the BTK project encountered obstacles of a very different nature - political, financial and technological. The government first tried to build a road at the expense of Western loans. However, then it would be politically important to restore the existing road from Armenian Gyumri to Kars. So the refusal of lending was openly political. The road had to be built at the expense of the participants of the project themselves. There was even a moment when the new head of Georgia Ivanishvili tried to inflate the rates and said the prices for the construction of the road were overstated, clearly hinting at the corruption schemes. The Turkish section of the project has repeatedly faced financial problems, and the solution of technological problems with tunnels took many months. In the course of the development of this project, there were other problems. In particular, it became clear that the Azerbaijani section of the road needed reconstruction and a billion-dollar loan from the World Bank was used for these purposes. In total, since the start of financing by SOFAZ, the project for the construction of the Baku-Tbilisi-Kars railway (BTK) has been allocated 630.2 million dollars (according to the data as of January 1, 2017. According to the agreement signed between the governments of Azerbaijan and Georgia, with these funds through the International Bank of Azerbaijan the Marabda-Kartsakhi Railroad LLC was created to design, build, rehabilitate, reconstruct and operate the Marabda-Turkish Border railway and the relevant infrastructure facilities. In 2016, $ 41.9 million was allocated from SOFAZ for the project. The peak capacity of the corridor will be 17 million tons of cargo per year. At the initial stage this figure will be at the level of one million passengers and 6.5 million tons of cargo. Its commissioning is planned in the second half of 2017.

Ten years is, of course, an unreasonably long period for the implementation of the BTK project. But maybe this is for the better, because many problems related to the future transit through the Caspian Sea still have to be solved. And the rates here are considerable - to move from today's 15,000 containers per year to the expected annual transit volumes of 1 million containers (or even 5 million containers, if you put such a super task and make an incredible effort).

TRACECA National Secretary from Azerbaijan Akif Mustafayev announced recently that the special working group on the Trans-Caspian International Transport Route (TCITR), meeting in Astana, agreed on the tariffs along the route. "Now it becomes urgent to resolve the issue of a single (through) tariff for TCITR, and this will inevitably lead to the emergence of its single operator," Mustafayev said. According to him, transit success depends on four different factors: tariffs, service (from customs services to personal services), travel time and security. And he referred to the words of the President of the country that this shortest land route has not been fully utilized so far and that Azerbaijan needs to offer better conditions for the growth of cargo transshipment through the country. In particular, the entire port structure has already been created at the Baku International Sea Trade Port, erected in Alat. But now the problem is the shortage of domestic services on its land area. On the same days, the customs station on the Red Bridge between Azerbaijan and Georgia was put in order.

Beginning of the article:http://www.contact.az/docs/2017/Analytics/032900186616en.htm#.WNzxgfmLTs0

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