State Oil Fund of Azerbaijan: Difference between revisions
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== History == |
== History == |
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The State Oil Fund of the Republic of Azerbaijan (SOFAZ) was established by the decree of the late President [[Heydar Aliyev]] on December 29, 1999.<ref>{{cite web |url=https://www.investopedia.com/terms/s/state-oil-fund.asp |title=State Oil Fund (Azerbaijan) |last= |first= |date= |website=www.investopedia.com |publisher= |access-date=October 28, 2021 |quote=}}</ref><ref>{{cite web |url=http://www.e-qanun.az/framework/5261 |title=Azərbaycan Respublikasının Dövlət Neft Fondunun yaradılması haqqında AZƏRBAYCAN RESPUBLİKASI PREZİDENTİNİN FƏRMANI |last= |first= |date=December 29, 1999 |website=www.e-qanun.az |publisher= |access-date=October 28, 2021 |quote=}}</ref> The management guidelines of the fund were developed in cooperation with IMF. The SOFAZ is a fund set up to collect the revenues Azerbaijan will get from the fulfilment of the contracts signed between SOCAR and foreign oil companies on oil and natural gas search, their extraction and production sharing, as well as from the realisation of the agreements on searching oil and natural gas reserves in Azerbaijan, particularly in the Azerbaijani sector of the Caspian Sea. <ref>3. https://www.researchgate.net/profile/Elchin-Suleymanov/publication/332179277_Economy_of_Azerbaijan_25_years_of_independence/links/5ca4ae0fa6fdcc12ee8fc61d/Economy-of-Azerbaijan-25-years-of-independence.pdf</ref> |
The State Oil Fund of the Republic of Azerbaijan (SOFAZ) was established by the decree of the late President [[Heydar Aliyev]] on December 29, 1999.<ref>{{cite web |url=https://www.investopedia.com/terms/s/state-oil-fund.asp |title=State Oil Fund (Azerbaijan) |last= |first= |date= |website=www.investopedia.com |publisher= |access-date=October 28, 2021 |quote=}}</ref><ref>{{cite web |url=http://www.e-qanun.az/framework/5261 |title=Azərbaycan Respublikasının Dövlət Neft Fondunun yaradılması haqqında AZƏRBAYCAN RESPUBLİKASI PREZİDENTİNİN FƏRMANI |last= |first= |date=December 29, 1999 |website=www.e-qanun.az |publisher= |access-date=October 28, 2021 |quote=}}</ref> The management guidelines of the fund were developed in cooperation with IMF. The SOFAZ is a fund set up to collect the revenues Azerbaijan will get from the fulfilment of the contracts signed between SOCAR and foreign oil companies on oil and natural gas search, their extraction and production sharing, as well as from the realisation of the agreements on searching oil and natural gas reserves in Azerbaijan, particularly in the Azerbaijani sector of the Caspian Sea. <ref>3. https://www.researchgate.net/profile/Elchin-Suleymanov/publication/332179277_Economy_of_Azerbaijan_25_years_of_independence/links/5ca4ae0fa6fdcc12ee8fc61d/Economy-of-Azerbaijan-25-years-of-independence.pdf</ref> |
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The main mission of SOFAZ is to transform hydrocarbon reserves into enduring financial assets that yield continuous revenue for both present and forthcoming generations.<ref>https://e-qanun.az/framework/148</ref> |
The main mission of SOFAZ is to transform hydrocarbon reserves into enduring financial assets that yield continuous revenue for both present and forthcoming generations.<ref>https://e-qanun.az/framework/148</ref> |
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SOFAZ's endeavors are aimed at attaining the subsequent goals: <ref>https://www.ifswf.org/members/azerbaijan</ref> |
SOFAZ's endeavors are aimed at attaining the subsequent goals: <ref>https://www.ifswf.org/members/azerbaijan</ref> |
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Supporting macroeconomic stability, participating in ensuring fiscal-tax discipline and decreasing dependence on oil revenues while stimulating development of the non-oil sector; |
* Supporting macroeconomic stability, participating in ensuring fiscal-tax discipline and decreasing dependence on oil revenues while stimulating development of the non-oil sector; |
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* |
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Funding major national scale projects to support socio-economic progress; |
* Funding major national scale projects to support socio-economic progress; |
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* |
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Ensuring intergenerational equality with regard to the country's oil wealth, accumulating and preserving oil revenues for future generations. |
* Ensuring intergenerational equality with regard to the country's oil wealth, accumulating and preserving oil revenues for future generations. |
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* |
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SOFAZ's operations are overseen by the Supervisory Board, which comprises representatives from state authorities and public organizations. This board assumes comprehensive supervision, reviewing and assessing the draft annual budget, annual report, financial statements, and audit reports of SOFAZ. Approval for Supervisory Board members is granted by the President of Azerbaijan, and their involvement is voluntary. |
SOFAZ's operations are overseen by the Supervisory Board, which comprises representatives from state authorities and public organizations. This board assumes comprehensive supervision, reviewing and assessing the draft annual budget, annual report, financial statements, and audit reports of SOFAZ. Approval for Supervisory Board members is granted by the President of Azerbaijan, and their involvement is voluntary. |
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SOFAZ's day-to-day activities are managed by the Executive Director appointed by the President of the Republic of Azerbaijan. |
SOFAZ's day-to-day activities are managed by the Executive Director appointed by the President of the Republic of Azerbaijan. |
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The Executive Director represents the Fund, administers personnel appointments and terminations, oversees operational activities, and ensures the appropriate management and investment of SOFAZ's assets according to the Guidelines ratified by the President of Azerbaijan. |
The Executive Director represents the Fund, administers personnel appointments and terminations, oversees operational activities, and ensures the appropriate management and investment of SOFAZ's assets according to the Guidelines ratified by the President of Azerbaijan. |
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The execution of SOFAZ's budget adheres to the comments provided by the Supervisory Board, following the approval of the SOFAZ budget by presidential decrees. SOFAZ's asset management adheres to the "Rules on the Management of Foreign Currency Assets of the State Oil Fund of the Republic of Azerbaijan" and the Investment Policy.<ref>https://e-qanun.az/framework/5261</ref> |
The execution of SOFAZ's budget adheres to the comments provided by the Supervisory Board, following the approval of the SOFAZ budget by presidential decrees. SOFAZ's asset management adheres to the "Rules on the Management of Foreign Currency Assets of the State Oil Fund of the Republic of Azerbaijan" and the Investment Policy.<ref>https://e-qanun.az/framework/5261</ref> |
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== Revenues and expenditures == |
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SOFAZ's revenue sources: |
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* Proceeds generated from the sale of the Republic of Azerbaijan's share of hydrocarbons under production sharing agreements (PSAs). |
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* Bonuses paid according to PSA terms. |
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* |
|||
* Acreage fees paid by foreign investors for utilizing contract areas in hydrocarbon resource development. |
|||
* Dividends paid under the terms of PSAs. |
|||
* Revenues accrued from oil and gas transit across the territory of the Republic of Azerbaijan. |
|||
* Revenues stemming from asset transfers by investors. |
|||
* Revenues from the management of SOFAZ's assets. |
|||
* Grants. |
|||
* Other revenues permitted by the legislation. |
|||
In line with SOFAZ regulations, the Fund's assets are channeled towards resolving major national issues and constructing or reconstructing vital infrastructure to support socio-economic progress. |
|||
Transfers to the state budget constitute a significant component of the Fund's outflows, while a minimal portion of the assets is utilized towards covering operational expenses.<ref>https://e-qanun.az/framework/148</ref> |
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As mandated by the Law "About Budget System" of the Republic of Azerbaijan, all SOFAZ expenditures, except operational costs, are included within the annual consolidated government budget, which is presented to the Parliament for approval. SOFAZ is authorized to carry out expenditures outlined in its budget, complying with this legal framework. |
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As of March 2023, the total value of SOFAZ's assets surpassed $53.4 billion, positioning it among the most substantial sovereign wealth funds globally. The fund retains its crucial significance in furthering Azerbaijan's economic and societal progress, and its influence is projected to persist as a principal catalyst for the nation's enduring advancement and prosperity in the foreseeable future.<ref>8. https://www.oilfund.az/report-and-statistics/get-download-file/6_2023_1_en.pdf</ref> |
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== Transparency and accountability == |
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The State Oil Fund of Azerbaijan (SOFAZ) adheres to fundamental principles of transparency and accountability in its operational framework. Operating as a sovereign wealth fund, SOFAZ is deeply committed to conducting its undertakings in a manner characterized by openness, transparency, and a sense of responsibility. |
|||
In order to realize this commitment, SOFAZ regularly releases comprehensive reports detailing its operational activities and financial performance. These reports are made readily accessible to the general public via its official website. These reports encompass detailed information on the Fund's investment portfolio, asset allocation, and investment performance, as well as information on its spending activities and social projects. |
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In addition, SOFAZ is subject to rigorous external audits conducted by globally recognized auditing entities. SOFAZ’s financial performance in 2022 was audited by PricewaterhouseCoopers. |
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SOFAZ's public communication strategies are intricately aligned with its Information Policy. This policy framework has been meticulously developed in accordance with the "On Access to Information" Law of the Republic of Azerbaijan. The objective is to facilitate efficient management of information exchange between SOFAZ and its stakeholders and the broader public. It also serves to safeguard and cultivate the organization's reputation as a transparent state entity. The Information Policy delineates the guiding principles, objectives, and goals pertaining to the dissemination of operational and activity-related information by SOFAZ to its stakeholders and the public, in alignment with the overarching objectives of the Fund. |
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A testament to its unwavering dedication, SOFAZ achieved an impressive overall score of 92, securing the 5th position among 64 sovereign wealth funds (SWFs) in the 2019 Sovereign Wealth Fund Transparency and Accountability Scoreboard published by the Peterson Institute for International Economics. This scorecard evaluates a comprehensive spectrum of facets, encompassing Asset Management, Governance, Resilience, Transparency and Accountability, as well as the implementation of Santiago Principles. In each category and subcategory of this assessment for 2019, SOFAZ consistently garnered nearly the highest marks. |
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The Peterson Institute for International Economics has also developed an assessment tool known as the Generally Accepted Principles and Practices (GAPP), to assess the implementation of Santiago Principles and in this evaluation, SOFAZ achieved the 5th rank as well. This assessment is grounded on 16 out of the 24 Santiago Principles, closely aligning with the constituents of the SWF scoreboard.<ref>9. https://www.piie.com/sites/default/files/documents/pb21-3.pdf</ref> |
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In June 2024, SOFAZ announced to invest US$ 100 million into Dubai-based [[GEMS Education]].<ref>{{Cite web |date=2024-06-18 |title=Azerbaijan’s State Oil Fund to invest $100M in one of world’s largest private education providers |url=https://report.az/en/finance/azerbaijan-s-state-oil-fund-investing-in-one-of-world-s-largest-private-education-providers/ |access-date=2024-07-03 |website=Report News Agency |language=en}}</ref><ref>{{Cite web |date=2024-06-18 |title=SOFAZ invests in one of largest private companies providing educational services in world |url=https://www.azernews.az/business/227549.html |access-date=2024-07-03 |website=Azernews.Az |language=en}}</ref> |
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== Awards == |
== Awards == |
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Revision as of 10:11, 22 August 2024
| Azərbaycan Respublikasının Dövlət Neft Fondu | |
 | |
| Abbreviation | SOFAZ |
|---|---|
| Established | December 29, 1999 |
| Founded at | Baku, Azerbaijan |
| Type | SWF |
Executive Director | Israfil Mammadov |
| Award(s) | United Nations Public Service Awards EITI Award |
| Website | www.oilfund.az |
The State Oil Fund of the Republic of Azerbaijan (SOFAZ), founded in December 1999 through a Presidential Decree, serves as a sovereign wealth fund that gathers and safeguards the country's oil and gas earnings to benefit future generations.[1] Operated independently as an extra-budgetary entity, SOFAZ is distinct from the government of Azerbaijan and Central Bank.[2]
History
The State Oil Fund of the Republic of Azerbaijan (SOFAZ) was established by the decree of the late President Heydar Aliyev on December 29, 1999.[3][4] The management guidelines of the fund were developed in cooperation with IMF. The SOFAZ is a fund set up to collect the revenues Azerbaijan will get from the fulfilment of the contracts signed between SOCAR and foreign oil companies on oil and natural gas search, their extraction and production sharing, as well as from the realisation of the agreements on searching oil and natural gas reserves in Azerbaijan, particularly in the Azerbaijani sector of the Caspian Sea. [5]
Mission
The main mission of SOFAZ is to transform hydrocarbon reserves into enduring financial assets that yield continuous revenue for both present and forthcoming generations.[6]
Objectives
SOFAZ's endeavors are aimed at attaining the subsequent goals: [7]
- Supporting macroeconomic stability, participating in ensuring fiscal-tax discipline and decreasing dependence on oil revenues while stimulating development of the non-oil sector;
- Funding major national scale projects to support socio-economic progress;
- Ensuring intergenerational equality with regard to the country's oil wealth, accumulating and preserving oil revenues for future generations.
Management
SOFAZ's operations are overseen by the Supervisory Board, which comprises representatives from state authorities and public organizations. This board assumes comprehensive supervision, reviewing and assessing the draft annual budget, annual report, financial statements, and audit reports of SOFAZ. Approval for Supervisory Board members is granted by the President of Azerbaijan, and their involvement is voluntary.
SOFAZ's day-to-day activities are managed by the Executive Director appointed by the President of the Republic of Azerbaijan.
The Executive Director represents the Fund, administers personnel appointments and terminations, oversees operational activities, and ensures the appropriate management and investment of SOFAZ's assets according to the Guidelines ratified by the President of Azerbaijan.
The execution of SOFAZ's budget adheres to the comments provided by the Supervisory Board, following the approval of the SOFAZ budget by presidential decrees. SOFAZ's asset management adheres to the "Rules on the Management of Foreign Currency Assets of the State Oil Fund of the Republic of Azerbaijan" and the Investment Policy.[8]
Revenues and expenditures
SOFAZ's revenue sources:
- Proceeds generated from the sale of the Republic of Azerbaijan's share of hydrocarbons under production sharing agreements (PSAs).
- Bonuses paid according to PSA terms.
- Acreage fees paid by foreign investors for utilizing contract areas in hydrocarbon resource development.
- Dividends paid under the terms of PSAs.
- Revenues accrued from oil and gas transit across the territory of the Republic of Azerbaijan.
- Revenues stemming from asset transfers by investors.
- Revenues from the management of SOFAZ's assets.
- Grants.
- Other revenues permitted by the legislation.
In line with SOFAZ regulations, the Fund's assets are channeled towards resolving major national issues and constructing or reconstructing vital infrastructure to support socio-economic progress.
Transfers to the state budget constitute a significant component of the Fund's outflows, while a minimal portion of the assets is utilized towards covering operational expenses.[9]
As mandated by the Law "About Budget System" of the Republic of Azerbaijan, all SOFAZ expenditures, except operational costs, are included within the annual consolidated government budget, which is presented to the Parliament for approval. SOFAZ is authorized to carry out expenditures outlined in its budget, complying with this legal framework.
Assets
As of March 2023, the total value of SOFAZ's assets surpassed $53.4 billion, positioning it among the most substantial sovereign wealth funds globally. The fund retains its crucial significance in furthering Azerbaijan's economic and societal progress, and its influence is projected to persist as a principal catalyst for the nation's enduring advancement and prosperity in the foreseeable future.[10]
Transparency and accountability
The State Oil Fund of Azerbaijan (SOFAZ) adheres to fundamental principles of transparency and accountability in its operational framework. Operating as a sovereign wealth fund, SOFAZ is deeply committed to conducting its undertakings in a manner characterized by openness, transparency, and a sense of responsibility.
In order to realize this commitment, SOFAZ regularly releases comprehensive reports detailing its operational activities and financial performance. These reports are made readily accessible to the general public via its official website. These reports encompass detailed information on the Fund's investment portfolio, asset allocation, and investment performance, as well as information on its spending activities and social projects.
In addition, SOFAZ is subject to rigorous external audits conducted by globally recognized auditing entities. SOFAZ’s financial performance in 2022 was audited by PricewaterhouseCoopers.
SOFAZ's public communication strategies are intricately aligned with its Information Policy. This policy framework has been meticulously developed in accordance with the "On Access to Information" Law of the Republic of Azerbaijan. The objective is to facilitate efficient management of information exchange between SOFAZ and its stakeholders and the broader public. It also serves to safeguard and cultivate the organization's reputation as a transparent state entity. The Information Policy delineates the guiding principles, objectives, and goals pertaining to the dissemination of operational and activity-related information by SOFAZ to its stakeholders and the public, in alignment with the overarching objectives of the Fund.
A testament to its unwavering dedication, SOFAZ achieved an impressive overall score of 92, securing the 5th position among 64 sovereign wealth funds (SWFs) in the 2019 Sovereign Wealth Fund Transparency and Accountability Scoreboard published by the Peterson Institute for International Economics. This scorecard evaluates a comprehensive spectrum of facets, encompassing Asset Management, Governance, Resilience, Transparency and Accountability, as well as the implementation of Santiago Principles. In each category and subcategory of this assessment for 2019, SOFAZ consistently garnered nearly the highest marks.
The Peterson Institute for International Economics has also developed an assessment tool known as the Generally Accepted Principles and Practices (GAPP), to assess the implementation of Santiago Principles and in this evaluation, SOFAZ achieved the 5th rank as well. This assessment is grounded on 16 out of the 24 Santiago Principles, closely aligning with the constituents of the SWF scoreboard.[11]
Awards
- United Nations Public Service Awards (2007)[12]
- EITI Award (2009)[13]
References
- ^ 1. Microsoft Word - AzerbaijanEconomy_Book_EN_Designed (researchgate.net)
- ^ https://www.ifswf.org/members/azerbaijan
- ^ "State Oil Fund (Azerbaijan)". www.investopedia.com. Retrieved October 28, 2021.
- ^ "Azərbaycan Respublikasının Dövlət Neft Fondunun yaradılması haqqında AZƏRBAYCAN RESPUBLİKASI PREZİDENTİNİN FƏRMANI". www.e-qanun.az. December 29, 1999. Retrieved October 28, 2021.
- ^ 3. https://www.researchgate.net/profile/Elchin-Suleymanov/publication/332179277_Economy_of_Azerbaijan_25_years_of_independence/links/5ca4ae0fa6fdcc12ee8fc61d/Economy-of-Azerbaijan-25-years-of-independence.pdf
- ^ https://e-qanun.az/framework/148
- ^ https://www.ifswf.org/members/azerbaijan
- ^ https://e-qanun.az/framework/5261
- ^ https://e-qanun.az/framework/148
- ^ 8. https://www.oilfund.az/report-and-statistics/get-download-file/6_2023_1_en.pdf
- ^ 9. https://www.piie.com/sites/default/files/documents/pb21-3.pdf
- ^ "List of Winners and Finalists for the 2007 UN Public Service Awards" (PDF). unpan1.un.org. Archived from the original (PDF) on March 5, 2016.
- ^ "EITI Chairman's Awards presented in Doha". eiti.org. EITI. February 24, 2009. Archived from the original on October 30, 2021. Retrieved October 28, 2021.
Source
- Aslanli, Kenan (2015). "Fiscal sustainability and the State Oil Fund in Azerbaijan". Journal of Eurasian Studies. 6 (2): 114–121. doi:10.1016/j.euras.2015.03.004. ISSN 1879-3665.