ALL THE UPSIDES

Azerbaijan 2016 | ECONOMY | INTERVIEW

TBY talks to Mir Jamal Pashayev, Director of PASHA Holding, on organizing a large, multi-faceted group, private equity services, and growth sectors.

Mir Jamal Pashayev
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.