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

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

CESD Report Sparks Probe into Missing Millions

This paper covers the construction and monitoring of the Baku Tbilisi Kars (BTK) railway. Throughout the process of monitoring, we encountered interesting facts that raise questions about the transparency of the construction project and that suggest that the process of selecting contractors, initial project costs, and cost varying factors have been ineffective. Like most other construction projects funded by the State Oil Fund of the Republic of Azerbaijan (SOFAZ or the “Fund”), the BTK project also lacks effective management of the Fund’s assets for the current work undertaken (not matching with documented money transfers). The inefficient management of the project is exemplified by the numerous delays in meeting projected completion milestones and the fact that the cost of the project has more than tripled.

Because of the lack of information that is being disclosed to the public about the expenditures within the framework of the project, it is very difficult to make conclusions about certain aspects of the work being done. Since the beginning of the financing of the project until April 01 2012, some 286 million USD, including 6.1 million USD during the first quarter of 2012, were allocated from the Oil Fund by the Treasury to the Ministry of Transport. According to the bilateral agreement between Georgia and Azerbaijan these assets were transferred to the account of Marabda-Kartsaxi Railway LLC through the International Bank of Azerbaijan for relevant infrastructure project design, construction, rehabilitation, reconstruction, as well as for the established maintenance of the Marabda-border of the Republic of Turkey (Kartsakhi) Railway Section. It should be noted that this amount already exceeds the initially estimated cost which was 202 million USD.


Meanwhile. a monitoring group operated by the Center for Economic and Social Development (CESD) in Baku issued a report that shows Azerbaijani government agencies disagree by millions of dollars on how much the state is spending on construction of the Baku-Tbilisi-Kars railway project. Ministry of Transportation of the Azerbaijan Republic said that $58.5 million was spent for the construction this year. Meanwhile, the State Oil Fund pegged the number at $48.1 million.

There is a $10.4 million difference among spending only for 2011, which does not have any explanation. No evidence where the $10.4 million was missed. The report found numerous other conflicts between official spending reports published by the State Oil Fund, the transportation ministry, and financial statements from the government of Georgia, which is also working on the project.

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