Caspian Energy Journal Caspian European Club
Tuesday, 10 November 2015 15:20

New steps to boost development of Azerbaijan-EU economic cooperation - Ambassador of the Czech Republic Vitezslav Pivonka Featured

Caspian Energy (CE): Mr. Pivonka, currently in Azerbaijan the President of Azerbaijan, Mr. Ilham Aliyev is taking certain measures to boost business development, competitive environment, production industries. What will be the effects of changes on the investment environment, attraction of investments from Czechia and the EU? 

Vitezslav Pivonka, Ambassador Extraordinary and Plenipotentiary of the Czech Republic to the Republic of Azerbaijan : An international situation has changed and that impacts the economy as well. At the recent session of the Cabinet of Ministers President Ilham Aliyev clearly emphasized a number of areas paramount for further development of the economy. Me and my colleagues are well aware of inevitability of these steps, since we have recently walked on the same difficult path.

There is a lot that has been done in Azerbaijan during recent years. We can see the results. There are British, American, German, Czech, Russian, Italian and other international companies operating here for a long period. There is a big potential for cooperation and long-term prospects are obvious.

New steps that Azerbaijan is now going to implement will undoubtedly secure a new push for a further development of the economic relations between Azerbaijan and the EU member states.  

CE: Does Czechia as the EU member state and investment partner of Azerbaijan support steps in this regard?

Vitezslav Pivonka: Certainly. Czechia has already invested over $2 billion in loans to infrastructure projects in Azerbaijan. We have projects financed by the Czech National Bank, Czech Export Bank, and private banks as well. In this regard I would like to emphasize  joint project of the Baku-Tbilisi-Kars railroad implemented by Moravia Steel Company, which represents over 0.5 billion US dollars of investments.Concurrently, the share of Azerbaijan oil in the energy balance of the Czech Republic makes up 30%.  

CE: Mr. Pivonka, it is commonly known that the trade turnover between Azerbaijan and Czechia is on the rise from year to year. For 6 months of 2015 it reached $308.52 million. Which factors hamper and which ones boost improvement of these figures?

Vitezslav Pivonka: Absolutely, the trade turnover between our two countries is gradually rising for more than a decade now. We very much welcome this positive and lasting trend but on the other hand we are aware that it will not continue simply by inertia.

Relations between the states are similar to the relations between people, should they be left unattended, they will gradually become reserved. This is the reason why our embassy is trying its best to keep the relations between our two nations as close as possible.

CE: What figures do you expect for trade turnover this year? 

Vitezslav Pivonka: The trade turnover is consistently rising. Along with the “classic” areas of cooperation such as energy and transport sectors, other industries are developing as well, which can in turn positively influence the trade turnover. We can see a growing potential,  in the field of agriculture and tourism for example.

We highly appreciate that your tourists travel not only to Prague and Karlovy Vary, but at the same time they are starting to discover other cities and regions of the Czech Republic.  Moreover, during his visit to Baku, President Miloš Zeman invited the Azerbaijanis to the Czech Republic not only as tourists, but also as investors. Many citizens of Azerbaijan have already bought real estates in the Czech Republic and we are very much pleased about this fact.


CE: How fruitful was the recent visit of the Czech delegation with President of Czechia Miloš Zeman at the head? Which agreements have been reached during the meetings?

Vitezslav Pivonka: The visit of our President Miloš Zeman to Azerbaijan was certainly successful, and it gave an important impulse for the development of the Czech-Azeri relations.

Right now we have one strategical joint project with Azerbaijani government and that is the construction of the Baku-Tbilisi-Kars railroad. During the presidential visit we discussed the prospects of cooperation in other areas like energy and construction sectors, environmental technologies, healthcare, agriculture and waste management but no contracts have been signed, yet. 

CE: Investments of the Czech entrepreneurs to the first stage of the Baku-Tbilisi-Kars railroad project have turned to be a success story. Do Czech entrepreneurs have intentions to contribute investments to the second stage?     

Vitezslav Pivonka: You are absolutely right, the Baku-Tbilisi-Kars railroad is a very successful project and we are grateful that the Czech companies had the opportunity to participate in it. Because of such positive experience with working in Azerbaijan I am certain our companies are more than interested in participating in the second stage of the project.

CE: How would you evaluate the progress on work towards signing a memorandum of intentions on cooperation in the energy sector between Azerbaijan and Czechia? Which paragraphs will it include?

Vitezslav Pivonka: It is my pleasure to inform your readers that the document is almost finished and we are looking together with the Azerbaijani side for a suitable opportunity to sign it. The purpose of this Memorandum is to provide both sides with the formal grounds on which the mutually beneficial cooperation in the energy sector shall be based.

I sincerely believe that the Czech Republic could offer much expertise which will proof beneficial for Azerbaijan. While speaking about cooperation in the energy sector one should not forget that it does not necessarily mean the oil and gas industry only. The Czech Republic has the experience of modernizing its electricity transmission system to be compatible with the European standards, which is something we would like to offer to Azerbaijan as well. Furthermore the Czech companies have a long record of constructing and modernizing various types of electricity generation facilities, including those environment-friendly. I would like to stress that especially hydroelectric power stations will constitute excellent source of electricity for isolated mountainous villages.

CE: Which areas of investment cooperation should be given a greater boost? Do Czech investors face any problems?

Vitezslav Pivonka: During the last 10 years Czech banking sector [both state and private] invested over 2 billion USD in Azerbaijan, which rates the Czech Republic among the most important foreign investors in Azerbaijani economy. For this period we did not have a single case of non-payment which points to high payment discipline and financial responsibility of Azerbaijani companies.

CE: What makes the investment climate in Czechia attractive for investors from both Azerbaijan and other countries around the globe?

Vitezslav Pivonka: The Czech Republic is one of the most successful Central European countries in terms of attracting foreign direct investment. Over 173,000 Czech firms across all sectors are now supported by foreign capital. According to the Czech National Bank, a total amount of EUR 85 billion worth of FDI has been recorded since 1993.

The most important comparative advantages of the Czech Republic to attract foreign investments are in my opinion strategic location in the center of Europe, skilled and well educated workforce, developed transport infrastructure, extensive supplier base and developed real estate market. I strongly believe that the similar strategy is applicable not only in case of the Czech Republic, but states like Azerbaijan could greatly benefit from it as well. More importantly we are willing to share this know-how with our partners.

CE: Has the instability in Greece affected international projects of Azerbaijan and Czechia?

Vitezslav Pivonka: Firstly, I would not use the term “instability” in relation to the current situation in Greece, having said that I am far from attempting to downplay severity of the crisis there. Greece is definitely going through a very difficult period but the origins of its problems are purely economic.

If there is anything we could learn from their situation, it would be how stable the democratic societies are. Despite all their economic problems, Greeks were able to hold two parliamentary elections in one year, both of them observing the highest democratic standards. Could we label something like that as „instability”?

Back to your original question, since we are not a part of the eurozone, the ongoing economic processes in Greece do not affect the Czech economy. Also, I do not possess any information which might suggest that any international project between the Czech Republic and its partners abroad might have been influenced by the economic situation in Greece.

CE: Czechia is not bound by investment commitments with Greece and is not a donor of its debt liabilities, is not it?

Vitezslav Pivonka: No, we have not experienced any direct effects of Greece’s economic difficulties on us. However, both direct and indirect aspects have to be taken into consideration. As I have already mentioned, we are outside the eurozone, though since we are so closely tied with the EU market if the Euro have been challenged, it would probably affect our economy as well, albeit indirectly.

But the most important is that the Czech banking sector is very strong. We passed the crisis about 10 years ago and approached the great financial crisis of 2007/08 with a renewed banking system.

CE: That is, the fact that Czechia is not a part of the euro zone can be viewed as advantage…

Vitezslav Pivonka: It depends. In case of Greece, we have of course benefitted from not being a part of the eurozone. On the other hand, the euro area gives a lot of benefits for which a state should be prepared to fully capitalize on them. Our economy is growing, and at some point we will be ready to join the single European currency zone.

CE: When does Czechia plan to join the euro zone?

Vitezslav Pivonka: This issue will be considered with caution, taking into account all the social aspects of our economy, which is historically closely tied with the national currency - the Czech Crown. But I can say with some confidence that our government is going to join the eurozone.

Joining the eurozone has not only political, but also economic consequences. First we have to be sure that this step would be beneficial not only for the state but for our citizens as well. We are not the only state in the EU that has not joined the euro area yet. A referendum on the EU will be held in the UK soon. There will be new elections.

CE: Will it have an impact on Czechia’s decision?

Vitezslav Pivonka: No, it will have an impact on the European Union as a whole.

CE: Do you believe that if the UK votes for, it will have a strong influence on the future of the EU?

Vitezslav Pivonka: Currently we do not comment on this issue. We hope that the UK will not leave the EU. As you know, Scotland recently held a landmark referendum, during which the people voted for preserving its status within the United Kingdom. It also had an impact on the integrity of the EU.

CE: Could you please tell about plans with regard to diversification of energy sources? For instance, Romania and Bulgaria conduct exploration activities. Does Czechia plan to use domestic European networks for delivery of gas from the Southern Gas Corridor, like in case with oil?     

Vitezslav Pivonka: Unfortunately the Czech Republic does not own any oil or gas deposits. The only domestic deposits available to us are located in South-Eastern part of our country and their volumes are fairly limited.

Today, however, European consumers get more and more opportunities to diversify gas supplies, there are new terminals in Poland, Lithuania, Croatia, Norway is increasing its gas production, plans for deliveries of gas from Qatar and North America to Europe are being devised. With the help of interconnectors the European system will be able to develop into a single network, which is, among other, going to include the Southern Gas Corridor as its part. Through this single network the Czech Republic as well as other EU member states will be able to achieve necessary level of energy security.

CE: Do you believe that the EU should expand investment and trade relations with the Caspian littoral states?   

Yes, I believe that would be a very sound decision, equally beneficial for all the actors involved, thanks to the vast amounts of energy resources available in those countries, the EU could achieve much needed diversification of its energy supplies. In the same way Caspian states would be able to diversify the portfolio of their customers and therefore become less prone to changes in regional dynamics. This win-win solution is the rationale behind ongoing negotiations on the strategic partnership between EU and Azerbaijan.



                                                                                                                                                                Thank you for the interview

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