Baku, Fineko/abc.az. The Japanese Financial Corporation (since 1 October 2008 it has included the Japanese International Co-operation Agency (JICA) and the Japanese Bank for International Co-operation (JBIC)) has started realization of the Azerbaijan-Japan intergovernmental loan agreement on a watersupply and sewage project in secondary cities.

An Azerbaijani government source says that JICA has already hired a consulting company and awarded a grant for surveys in pilot regions within the project.

Earlier President Ilham Aliyev of Azerbaijan issued a decree on approval of the notes the Azerbaijan and Japanese governments’ representatives exchanged in Baku on 9 February of the year. The notes endorse an arrangement on the two countries’ loan agreement on watersupply & sewage project in secondary cities of Azerbaijan.

The decree commissions the Ministry of Foreign Affairs to notify the Japanese government about completion of internal governmental procedures for putting the notes into force.

The loan agreement itself was approved by the Azerbaijani president on 30 June after its ratification by Milli Majlis.

Earlier one of the issues for the beginning of realization of the agreement was optimization of territories to be covered by the project.

The Japanese party indicated quite large and that is why inefficient geographical scattering of project territories. Following its inquiry the area of project coverage was optimized.

The Japanese side has already received the papers confirming approval of the agreement. The same decision is expected from the Japanese as well as announcement by the JICA leadership on efficiency of the project. The project can be endorsed by them in September or October.

By ratifying the agreement Azerbaijan managed to ratify and endorse the agreement for the period given by the country’s leader – for 120 days from the day of its signing.

Under the agreement, JICA will extend a loan of Y32 bn ($344 million) for the project watersupply & sewage system in small cities.

The loan finances were given under annual interest rate of 0.65%. Overall cost of the project is $452 million and the Azerbaijani government will direct $108 million for its realization.

Earlier Azerbaijan and Japan have agreed the taxation regime within the project. As tax conditions contrast to regime on double taxation avoiding between the two countries, the loan agreement is ratified by Milli Majlis.

The project includes improvement of system of watersupply and sewage of Shirvan, Salyan, Neftchala, Khachmaz, Barda, Yevlakh, Khizi, Gusar, Gobustan and Naftalan regions. At the expense of credit finances it is planned construction of plants on water supply and sewage, purchase and installation of a water pipeline and consulting services.

Earlier the Japanese party was going to finance $260 million for the project.

The agreement covers financing for the project of watersupply & sewage system upgrade in 10 regions of the country. The JBIC project consultants are Tokyo Engineering (Japan) and ASPI Engineering (Azerbaijan).

According to their recommendation (cost of the project on each city is $30-40 million), the Bank increased estimate of its participation in the project from $160 million up to $260 million for five cities. Total cost of the project is estimated at $310 million.

JBIC is ready to apply a combined scheme of financing. One portion of its credit line will be extended for 30-year period under annual rate of 1.4% and the second one for 40-year term under rate of 0.65%. At the same time services of consultants on preparing selection and control over project works will be financed due to credit funds disbursed under rate 0.11% per annum for 40-year period.

29.10.2009 09:39