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Naveed Nagvi: There is still a lot to do in banking sector of Azerbaijan - Interview

20.07.2020,14:34


July 20, Fineko/abc.az. As you know, the term of office of the former World Bank Country Manager for Azerbaijan Naveed Hassan Naqvi has expired. In this regard, an ABC.AZ  employee interviewed Nagvi, covering questions about the activities over the past period, as well as about WB’s future plans for Azerbaijan.

We present this interview to your attention.

 

 The coronavirus pandemic has impacted the global economy. In this context how do you assess Azerbaijani economy’s prospects now and going forward.

The pandemic has brought an unprecedented challenge at every country's doorstep. The health challenge and the consequent lockdowns have acted as a supply shock in that people can no longer engage in their businesses as they were doing before. In addition, there is also the demand shock as people are no longer willing to spend as much money as they were doing before, either because they have lost jobs, or fear losing jobs. There is also a global decline in the price of oil which now rests in the $40 range and we see 28% decline in remittances from abroad on average across Europe and Central Asia. All these factors together suggest that we will see a contraction of approximately 3% of GDP in Azerbaijan in 2020. A lot is still unknown. We are all hoping that one of the vaccines that are under trial now will turn out to be effective and that we will be much more successful in dampening a possible second infection wave in the winter during the normal flu season. If, however, we find that a second round of stringent lockdowns are necessary over the winter, then we will have to deal with not just a recession in 2020 but continuing economic challenges in 2021. In any case, Azerbaijan is better placed than most countries in the world to deal with the economic challenges that the current crisis has brought to our doorstep. And I say this primarily because we can see a competent economic team in the key ministries, in the presidency, and in the vice president's office. In addition, the country is fortunate to have the equivalent of one year's GDP in a well-managed wealth fund. The country has deployed its resources to support both individuals who are poor, well as businesses and firms to help mitigate the damage of the economic crisis. But I think it will be important to keep in mind that we may be at the beginning of an economic crisis which may last well into 2021 and perhaps beyond. Therefore, the country needs a plan to actively manage this crisis beyond 2020. I think we need to focus on further deepening support to human capital in Azerbaijan. The school closures will have a major impact on the education, especially on children of younger ages and we will have to work very hard to make up for lost time. In addition, the social protection system will have to adapt in case a longer economic crisis materializes. We in the World Bank are fortunate to be a partner with the Ministry of Labor and Social Protection through a recently approved project where 100 million dollars have been allocated by the World Bank to support self-employment amongst the vulnerable segments of society.  We stand ready to also support the education and health sectors in dealing with the crisis and preparing for the world of the 21st century.

 

 What does Azerbaijan need to do in the backdrop of falling oil prices minimize the damage to the economy?

Oil has been a very important source of revenue for the country. Oil wealth has allowed the country to develop its infrastructure and rapidly ascend amongst nations to become a middle-income country. However, general international trends that precede the current pandemic, and the economic crisis that it has brought, would suggest that a future economic development strategy needs to diversify away from the current dependence on oil and gas. I think the decline in the price of oil should be seen as an opportunity to speed up reform efforts that I know already is getting traction at the highest level in government. Rightly the government is currently focused on relief to those most affected by this crisis, and on recovery so that the productive parts of the economy are protected. In the future, the country needs a medium-term development strategy that is focused on two things: Improving the quality of skills and education, and improving the business environment so that new private businesses are created along with good quality jobs. This is only possible when everyone in the country is assured of a good social protection system and a good health care system so that economic shocks don't send people into an irrecoverable poverty. Having spent four years in Azerbaijan I am confident that the hard-working people of the country and the talent of its youth will, with the right support from government, propel this country in the right direction. In 10 years, I would want to see that businesses are being created by young entrepreneurs and wealth is not restricted in the hands of a handful of very large holding companies and business houses. The future is bright and allowing greater participation of the younger generation in the economy, both in government and in the private sector, is the way forward.

 

 We've recently seen the central bank take over responsibilities for managing the financial sector and some commercial banks and insurance companies have been closed. What is your assessment of the banking sector in Azerbaijan?

 Deep economic shock in 2014-15 when oil prices came down from a high of 120 plus dollars a barrel to less than 1/3 of that value also uncovered the weaknesses of the financial sector. We saw several banks close in the aftermath of that crisis. The recent closure of banks in Azerbaijan is an additional step in the direction of making the banking sector more effective. There is clearly a lot of work that still needs to be done because access to finance is a key factor for entrepreneurial success in a diversified economy. The World Bank stands ready to deepen its partnership with the central bank in this effort. 

 

What do you see as effective areas of partnership in the future between the World Bank and Azerbaijan? And what new projects are being planned?

 In our last meeting with His Excellency the President Mr. Ilham Aliyev in June, together with the new World Bank Vice President Anna Bjerde and Regional Director Sebastian Molineus, the president instructed the World Bank to join the government in assessing the possibilities for economic diversification. At his direction, we will be working closely with Government by providing technical assistance in developing a medium-term strategic development plan for Azerbaijan. We agreed that priority would be given to World Bank support in the development of agriculture, water and irrigation, and health, as well as roads and railways. I feel very deeply that we need to work very hard on improving education quality across the entire spectrum of education from primary all the way to higher education. I'm especially pleased with the expansion of our support to judicial reform and the e-court system and wish to see our partnership deepen and continue in the sector.

 

 You have lived in Azerbaijan four years, perhaps you could tell us what are your favorite memories from your stay here?

Answer: My family and I absolutely love Baku – a magical city. Baku with its layers of history going back hundreds of years is an inspiring place to live and work. I always got the feeling that the future of Baku is going to be much grander than an already great past. A Pakistani singer named Iqbal Bano has sung the poetry of Nizami Ganjavi and because of that connection I have always had a soft spot for Ganja. The cuisine of Azerbaijan has been amazing. I especially love the breakfast with fresh bread, honey and shor.

Keywords: WorldBank