ALL THE UPSIDES
TBY talks to Mir Jamal Pashayev, Director of PASHA Holding, on organizing a large, multi-faceted group, private equity services, and growth sectors.
BIOGRAPHY
Mir Jamal Pashayev graduated from the Physics Department at Moscow State University in 1993, and went on to obtain his Master of Science in Engineering from California State University in 1996, followed by a Master of Business Administration from American University in Washington D.C. in 1998. He joined the Mobil Corporation as a business project consultant to the company’s Dallas and Washington offices in 1998 before arriving in Baku in 1999, where he took on the position of specialist to the Central Bank of Azerbaijan. He joined the European Bank of Reconstruction and Development (EBRD) as financial analyst in 2000, and was soon promoted to the position of banker on infrastructure projects. From 2005, he was engaged in consulting activities for large-scale investment projects in the fields of infrastructure, telecommunications, and financial services. He has been the Managing Director at PASHA Holding since 2006. He is also Chairman of the Supervisory Boards of PASHA Bank Azerbaijan and PASHA Bank Georgia, as well as head of the Board of Directors of PASHA Insurance.PASHA Holding is involved in essentially every major sector of the economy. How do you go about organizing such a multi-faceted holding group?
Currently, that is at the top of our agenda. From 2006 to 2012, we worked in an opportunistic way, trying to capture as large a market share as possible. After 2012, the situation changed in the region and the large markets that surround Azerbaijan were affected. We started thinking about optimization and improving corporate governance in terms of trimming costs and removing inefficiencies. Previously, we were loosely running the corporate agenda from the center of PASHA Holding; however, we realized that we needed some stronger controls to prepare ourselves for the economic slowdown. In 2014, we started to talk to McKinsey & Company in order to shape our strategy more efficiently and create an organizational structure that would yield a more efficient management model. We completed the project at the beginning of 2015, and now we are actively implementing this new corporate governance model, leading to the creation of more units, such as a banking group at the corporate center level. In the banking sector in Azerbaijan, we own two banks and we also expanded to own two regional banks, PASHA Bank Georgia and PASHA Bank Turkey. The need for further coordination was clear. The model we used was sophisticated by international standards, which required us to raise our capacities to meet these international levels. Now, we are much better equipped to deal with an economic slowdown. When business development is lagging, it is a good time to look internally to minimize costs and optimize the processes. That was the main purpose of this project.
How do the private equity services provided by PASHA Holding foster growth and competitiveness as a method of alternative financing for potential firms in Azerbaijan?
We were pioneers in experimenting with this; however, it requires a certain level of sophistication from the other side as well. There are certain issues we are still dealing with—the penetration of the banking sector into the economy is still limited, corporate governance standards are not adopted, and there are also some issues with basic financial management in local companies. We have developed a model through which we can assist these companies via our private equity investment fund, rather than our banks. Because this is a risky model, we have also required some of our candidate clients to make some reforms in terms of financial management and corporate governance. For this model to be successful, there has to be capital markets, which are limited in Azerbaijan at this stage, and strong strategic sponsors, which we are helping to develop. We must also have more active participation from foreign investors, which the government is working to support. I would like private equity to become a pillar of business for PASHA Holding because the upside is enormous. We are the first; no one has even experimented with it yet. On the private equity side, we are incurring all the risks, but could potentially gain all the upsides.
Are there any sectors of the economy in which PASHA Holding is looking to expand?
We are looking at tourism as a potentially booming sector going forward, and we are initiating a couple of pilot projects in agriculture. We believe the next boom in Azerbaijan will be agriculture. Almost all of Azerbaijan has fertile soil and the markets are close. However, the nearby Arab and European markets demand we certify our agricultural products. Certification is one of the elements of the chain that is not yet in place. To enter other markets and export in a systemic way, our producers need to upgrade their capacity in many ways.
ALL THE UPSIDES
TABLE OF CONTENTS
Year In Review
Good Times Ahead
<strong></strong><strong>In a year dominated by the overarching theme of low hydrocarbons prices, Azerbaijan showed resilience and verve in putting in place bold measures both to counter the slump in energy prices and put its economy on a surer footing.</strong>
read articleReview: Diplomacy
Operation Outreach
In 2015, Azerbaijan's military budget increased by a notable 27%, to $4.8 billion, or 17.9% of the government's total budget for the year. The first Azerbaijan Defence Exhibition (ADEX 2014), drew over 200 companies from 34 countries, including Russia and the US.
read articleInterview
Rufat Mammadov, President, Azerbaijan Export and Investment Promotion Foundation (AZPROMO)
TBY talks to Rufat Mammadov, President of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO), on large-scale events and their ability to attract FDI and the potential Iran may hold.
read articleReview: Banking
More Interest
In a sector faced with relatively flat growth for 2015-16, new opportunities are still there aplenty, led by the nascent Islamic banking sector, e-banking, and microfinance initiatives. Together, these areas should make banking more diversified and less reliant on a buoyant energy sector for its capital inlay.
read articleReview: Capital Markets
Taking Stock
As Azerbaijan grapples with the knock-on effects of low hydrocarbon prices, the Baku Stock Exchange (BSE) finds itself at the center of the country's efforts to stave off a budget deficit this year. In January, the government announced plans to sell $500 million worth of bonds on the BSE.
read articleReview: Industry & Mining
In The Bag
Industry in Azerbaijan is long established, diversified, and, in many areas, fast growing. Together, these qualities make the sector well placed to see through the global slump in commodity prices, while at home, the manufacturing industry continues to find ways to use its hydrocarbons expertise in other fields, including high technologies and research.
read articleInterview
Khanlar Fatiyev, , Chairman of the Supervisory Board, Ganja Automobile Plant Production Association
TBY talks to Khanlar Fatiyev, Chairman of the Supervisory Board of the Ganja Automobile Plant Production Association, on the role of the plant in driving growth in the non-oil sector.
read articleReview: Transport
The New Node
With major new railways linking the region, the opening of the new Baku International Sea Trade Port Complex, the completion of a massive program of road building and upgrading, investment in state-of-the-art fleets ranging from Boeing 787s to rail locomotives, Azerbaijan can rightly claim the title as the Caucasus' transportation hub.
read articleReview: Agriculture
Lots More
Farms across the country are pursuing a policy of increased yields for year-round fruit and in the wheat harvest to stave off an over-reliance on imports. With carefully targeted increases in exports, better routes to port and to market, and greater sophistication of agricultural facilities, farming could soon be the morning star of Azerbaijan's diversified economy.
read articleReview: Health
Under One Umbrella
Life expectancy at birth (2015) is 75 years for women and 70 for men. The median age is 30. For both sexes, longevity increased by six years between 2000 and 2012. Azerbaijan is a relatively youthful country—an important factor in healthcare—with 22% of its populace aged under 15 and just 9% aged over 60.
read articleReview: Education
Baku to School
Azerbaijan's culture has always harbored a deep respect for educational values. This is embodied in the country's Azerbaijan 2020 mission statement, which seeks to raise standards across the sector and introduce ICT as a standard part of the learning experience at all levels.
read articleInterview
Elkhan Mammadov,, Secretary General, Association of Football Federations of Azerbaijan (AFFA)
TBY talks to Elkhan Mammadov, Secretary General of the Association of Football Federations of Azerbaijan (AFFA), on the experience Azerbaijan is gaining in hosting international events.
read article