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Azerbaijan 2013 | ECONOMY | VIP INTERVIEW

TBY talks to Khagani Guluzade, Chairman of the Board of Directors & General Director of Akkord Industry Construction Investment Corporation, on the company's infrastructure and building materials projects, as well as initiatives being carried out abroad.

What contributions has Akkord Industry Construction Investment Corporation been making to the development of the local construction market and the non-oil sector in general?

As a public interest entity, Akkord Corporation is strongly committed to making its contribution to the development of the local construction market and generally the non-oil sector of Azerbaijan's economy. Within a short period of time, Akkord Corporation managed to become a national leader in the construction business field. In Azerbaijan, we are currently involved in large-scale road infrastructure projects of a total contract value of approximately AZN314 million. To date, the corporation has completed infrastructure projects with a total contract value of more than $1.7 billion in Azerbaijan and abroad. In addition, the corporation has been continuously developing two other lines of its core business: the construction of real estate and public facilities, and the production and processing of construction materials. As an important construction materials supplier, we provide concrete and concrete precasts, asphalt, gravel, sand, bricks, fabricated metal products, and others—not only for our own needs, but also for the wider market in Azerbaijan. Notably, Akkord Corporation is finalizing the installation of the first production line of its brand new cement plant in the Gazakh region of Azerbaijan. In general, the corporation owns and operates 39 various plants throughout the country. Regarding real estate development, the corporation has constructed and commissioned 10 housing estates covering a residential area of more than 775,000 sqm and more than 56,000 sqm of commercial space in Baku. One of our most recent business directions is the construction of water supply and sewage infrastructure systems in Azerbaijan. Currently, Akkord Corporation is implementing 11 such projects in six regions of the country, with a total contract value of almost AZN300 million. At a conference dedicated to the results of the fourth year of the implementation of the State Program for Social and Economic Development of the Regions of the Republic of Azerbaijan for 2009-2013, held on February 12, 2013 under the chairmanship of President Ilham Aliyev, the Head of State restated the priority of development in the non-oil sector of the economy and the strengthening of the export potential of the country. Through heavy investments in industry and manufacturing, the introduction of new technology and know-how, and the creation of new workplaces, Akkord Corporation makes a substantial contribution to the development of the non-oil sector.

What are some of the major domestic projects that Akkord is currently involved in?

There are several publicly significant projects I would like to emphasize. A long-term Conceptual Development Scheme for the Baku Metro, prepared following the President's decree on November 10, 2008, and the “State Program for the Development of Baku Metro in 2011-2015," approved on March 18, 2011, laid the groundwork for the metro's expansion plans. In collaboration with our French partner, Bouygues, we established a joint venture to participate in this expansion project. On November 7, 2012, Akkord-Bouygues JV signed an MoU with the Baku Metro Authority to reconstruct the 28th May Station and build the new Khatai-Azi Aslanov-2 section, a seven-kilometer stretch of the green line. In general, the development plan envisages the construction of more than 50 metro stations and 165 kilometers of tunnels in the coming 20 years in Baku. Another project is the Gazakh Cement Plant in western Azerbaijan, the feasibility study of which was worked out by Deloitte. The plant, having the prospective production capacity of 3 million tons of cement per year, will enable us to meet up to 75% of local demand for cement. The plant's construction covers two stages. The first stage envisages the annual production of 1 million tons of cement and will be commissioned in mid-2013. The second stage will produce an additional 2 million tons of cement per year. The development of the Gazakh Cement Plant for Akkord is carried out by CBMI, a subsidiary of the world-renowned SINOMA of China. We will apply the dry cement production method at the plant and the majority of the 1,000 people working at the plant will be recruited locally. President Ilham Aliyev visited the Gazakh Cement Plant to familiarize himself with the construction on April 12, 2012, and evaluated the project very highly. Another essential project is a road-tunnel complex at Galaba Square in Baku. The project was designed by Surbana International Consultants of Singapore and an architectural design was developed by Venezia Design of Italy. The road-tunnel complex consists of six tunnels, eight pedestrian crossings, and two new exits at the Ganjlik metro station. So far, one tunnel has been completed and its opening ceremony was led by the President on December 28, 2012. Currently, it is the largest ongoing road-tunnel infrastructure project in Baku.

“Our aim is to expand beyond Azerbaijan."

What is the geography and scope of Akkord Corporation's activities abroad?

We are currently active in several foreign markets including Turkey, Afghanistan, Georgia, Kazakhstan, Uzbekistan, and Ukraine. In addition, in 2012 the corporation opened its representative office in Frankfurt, Germany. The current portfolio of ongoing road infrastructure projects in foreign countries amounts to $1.1 billion. In Uzbekistan, we are a contractor for a project to reconstruct the M39 Tashkent-Termez Road, while in Kazakhstan we are working on the construction of the Western Europe-Western China International Transit Corridor in the Kyzylorda region. In Georgia, we are implementing a project to construct the Kutaisi Bypass Road, and in Ukraine we are rebuilding the Kiev-Chop Road. Furthermore, in Turkey we are involved in the construction of the Akçagöz-Başpınar Road. This international exposure strengthens our experience and intensifies our business contacts with foreign partners such as Salini and Todini of Italy and Freyssinet and Freysas, subsidiaries of Vinci Group in France. We give priority to those projects funded by international financial institutions like the World Bank, the European Bank for Reconstruction and Development (EBRD), Asian Development Bank (ADB), and the Islamic Development Bank (IDB). In the future, we are planning to enter the Russian construction market to bid for infrastructure projects that will be announced by the Russian government due to the upcoming 2018 FIFA World Cup. It is essential to bear in mind that in every foreign country, Akkord Corporation and its activities are representing Azerbaijan and its people. Therefore, we always deliver the best services and best products wherever we are working.

What have been the main achievements of Akkord Corporation in the past two years? What are your future plans and goals?

We managed to establish and strengthen a good team of professionals dedicated to their work. We have been heavily investing in human capital. A well-integrated corporate governance system was developed to add value to our business. Good governance, strengthened internal controls, and internal audits as well as risk management systems have also been implemented at Akkord. Moreover, we managed to diversify the sources of our financing and improve financial stability. Additionally in 2012, the corporation's charter capital was increased to AZN84 million. Akkord improved its financial reporting standards based on IFRS and contracted Deloitte as external corporate auditors. PwC has been contracted as a rating advisor for the first time assessment of Akkord by Fitch Ratings. In 2013, we are renewing our corporate rating and re-launching our Eurobond project to gain access to low-cost international financial markets. In parallel, we are continuing to bid for new projects domestically and internationally. Our aim is to expand beyond Azerbaijan and become an internationally competitive transnational corporation.

How would you evaluate Azerbaijan's economic development and competitiveness level in the international market?

Azerbaijan's economic successes are considerable. In the Global Competitiveness Index 2012-2013 by the World Economic Forum, Azerbaijan rose by nine positions and ranked 46 among 144 countries. This means that Azerbaijan is among the 50 most competitive economies in the world. The economic strategy set by President Aliyev precluded the negative impacts of the global financial crisis and ensured steady economic growth. The economy's high growth rates, clear and consistent government investment programs, measures on the diversification of the economy, and continuous support for the development of the non-oil sector will ensure long-lasting economic and social benefits for Azerbaijan and its people.

© The Business Year - April 2013