MAY 2011

Monitoring of Construction of Central Asia’s major railway project involving Azerbaijan, Georgia, and Turkey

The Center for Economic and Social Development (CESD), with the support of Partnership for Transperancy Fund (PTF) has begun monitoring the costs of the Baku-Tbilisi-Kars railway project which is financed by the State Oil Fund. According to the report of CESD the project will last for 14 months and the goal of it is to increase the impact of oil revenues on the Azerbaijan economy and to find ways to use them effectively.
During the mentioned period a monitoring group will be created for monitoring the Baku-Tbilisi-Kars railway project. The executives of the group will visit the places in Azerbaijan where the project is implemented as well as in Georgia and Turkey. On the basis of the research of the monitoring group a report will be produced. It should be mentioned that the State Oil Fund has allocated funds for the construction of the Baku-Tbilisi-Kars railway since 2007. 
BTK is a planned railway project. The railway line will start from Baku, and pass through the Georgian cities, Tbilisi and Akhalkalaki, ending in the city of Kars, Turkey. The total length of the Kars-Akhalkalaki railway line is 105 km. The Construction of the Turkish segment of the railway line which is 76 km is financed by Turkey, the Georgian segment of the project, a 29-km long Kars –Akhalkalaki railway line, as well as reconstruction of Akhalkalaki-Marabda railway line are both financed by the Republic of Azerbaijan with a 25 year $200 million loan with an annual rate of one percent that can be further extended. 
It should be mentioned that there is a mismatch among the financial reports of the State Oil Fund which allocates funds to railway construction and The Ministry of Transportation and Georgian side. Research shows that the implied allocations are not totally spent in accordance with the same budget year. For instance, in 2007 even though 30 million AZN were allocated to the project only 20,712.5 AZN were spent. The implementation percent of the project constituted 69 percent. In 2008 5.3 million AZN and in 2009 22.1 million AZN were spent to finance the project. Though the fund allocated in 2010 was reduced to 34 million AZN, till the end of the year 12.4 million AZN was spent. It is unknown whether the surplus has been returned. According to the Georgian press only $334 million out of the required $420 million have been allocated for the implementation of the project. 
According to the report of the fund from the beginning of the construction till 01.04.2011 the State Oil Fund has allocated in total $76.7 million as well as $2.7 million during January –March of 2011 to the Ministry of Transportation through the treasury. Monitorings show that though a great deal of money has been allocated, project works are carried out slowly. Very small part of the works has been fulfilled. For instance, in 2009 no duty has been carried out in this sphere. As a result, during three years approximately more than 25-30 percent of duties have been fulfilled. (Source-8th meeting of the coordination section of the project)
It should also be mentioned that the goal of CESD’s monitoring is to prepare a proposal package in order to increase trancperancy, efficiency on the expenditures of oil revenues to reveal the existing problems over the expenditures and to resolve those problems. 
CESD is leading Azerbaijani economic indepedent think tank. The center ranked top think tank in Caucasus, # 14 for Best Think Tanks in Central and Eastern Europe and #19 for Top Domestic Economic Policy Think Tanks in the World in 2010 by University of Pennsylvania, USA. More information about the center can be obtained at http://www.cesd.az/

For more information, please contact to Leyla Aliyeva at leyla.aliyeva@cesd.az