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Azerbaijan: Every child gets a voucher pie

International investors this summer gained their best chance yet to invest in Transcaucasia, the region of the CIS separating Russia and the Middle East, with the start of voucher privatization in Azerbaijan. The country's programme is more open to foreign investment than almost any other in the CIS and lets investors take exposure to an economy that is growing at more than 5% a year.

"Azerbaijan was at first slower to reform than other east European countries," says Thomas Bley, associate banker at the European Bank for Reconstruction & Development in London. "But since the start of this year the government has put a lot of effort into privatization and there has been substantial foreign interest in developing its natural resources, especially the oil and gas reserves."

Most foreign investment so far has taken the form of production-sharing agreements to exploit oil reserves in the Caspian Sea to the east of Azerbaijan. Voucher privatization could next year allow western investors to lift their exposure to the industry by buying shares in Aznefttechimmash, a complex of 19 enterprises manufacturing equipment for the oil industry, and eventually even in the state oil-production company.

Until recently, Azerbaijan has been held back by a conflict in Nagorno-Karabakh, a mountainous region whose predominantly ethnic Armenian population attempted to secede after the break-up of the USSR in 1991.

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