Public Disclosure Copy The World Bank Implementation Status & Results Report Capital Markets Modernization Project (P120321) Capital Markets Modernization Project (P120321) EUROPE AND CENTRAL ASIA | Azerbaijan | Financial and Private Sector Development Global Practice | IBRD/IDA | Technical Assistance Loan | FY 2011 | Seq No: 8 | ARCHIVED on 18-May-2015 | ISR18392 | Implementing Agencies: Azerbaijan State Committee for Securities Key Dates Key Project Dates Board Approval date:17-Mar-2011 Effectiveness Date:07-Nov-2011 Planned Mid Term Review Date:20-Jan-2014 Actual Mid-Term Review Date:03-Feb-2014 Original Closing Date:31-Dec-2015 Revised Closing Date:01-Jul-2016 Project Development Objectives Project Development Objective (from Project Appraisal Document) Increase the use of equity and corporate debt as financing and/or investment instruments through the adoption of an effective capital markets regulatory framework and infrastructure. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Component 1: Streamlining and Automating Market Infrastructure.:(Cost $6.00 M) Component 2: Updating and Strengthening the Legal and Regulatory Framework.:(Cost $1.90 M) Component 3: Stimulating Supply.:(Cost $1.80 M) Component 4: Capacity Building:(Cost $3.90 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Satisfactory  Moderately Satisfactory Overall Implementation Progress (IP)  Moderately Satisfactory  Satisfactory Overall Risk Rating  --  Low 5/18/2015 Page 1 of 6 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Capital Markets Modernization Project (P120321) Implementation Status and Key Decisions The State Committee for Securities (SCS) is progressing towards the CMMP’s benchmarks and goals. The single main consultancy assignment for USD 8.4 million was launched in September 2012 and contract implementation is satisfactory. The procurement for Capital Market Information System (CMIS) has been successfully completed and the contract awarded in early 2015. The Listing Advisory Program (LAP) was launched in mid April 2014 and is progressing well. The nationwide education program for financial literacy and SCS capacity builiding is under implementation. The project closing date was extended till July 1, 2016 to allow timely CMIS implementation. New Securities Market Law needs to be enacted by Parliament to enable new regulatory framework and help achieve project's development objectives. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  --  Low Macroeconomic  --  --  Substantial Sector Strategies and Policies  --  --  Low Technical Design of Project or Program  --  --  Low Institutional Capacity for Implementation and Sustainability  --  --  Moderate Fiduciary  --  --  Low Environment and Social  --  --  Low Stakeholders  --  --  Low Other  --  --  -- 5/18/2015 Page 2 of 6 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Capital Markets Modernization Project (P120321) Overall  --  --  Low Results Project Development Objective Indicators PHINDPDOTBL  Increased issuance of corporate bonds (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1.90 14.90 14.90 3.80 Date 15-May-2011 30-Sep-2014 13-Feb-2015 30-Jun-2016 PHINDPDOTBL  Increased number of companies with listed equity (accumulative) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 1.00 1.00 8.00 Date 15-May-2011 30-Sep-2014 13-Feb-2015 30-Jun-2016 PHINDPDOTBL  Improved price transparency (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 90.00 Date 15-May-2011 30-Sep-2014 13-Feb-2015 30-Jun-2016 Overall Comments 1. PDO #1: “use of corporate bonds” is ahead of schedule at a ratio of 11.0% to non-oil GDP, due to an overall net increase in the amount of corporate bonds outstanding. The static denominator for this ratio is 2010. 2. PDO #2: the “number of listed equity securities” remains at 1. Additional measures to be taken to accelerate progress in the Listing Advisory Program (LAP) and encourage more listing, including by bringing companies whose shares are actively traded in the alternative market and have sizeable free float. 3. PDO #3: “improved price transparency” is under methodology review. The original methodology measures the ratio of non-block transactions over total transactions in the equity market as the proxy of price transparency, assuming that block transactions are not competitive and non-transparent. However, the BSE recently took measures to make the block transactions (or cross-trades) competitive, by requiring any potential cross trade to be exposed to market for a 60-minute period to allow a counter-bid/offer to come. At the same time, the pre-pay requirement for a purchase order was removed so that brokers can put a buy order without posting any payment upfront. While theoretically these measures should make cross-trade more competitive, so far there has been no evidence of counter-bid/offer. This reflects a culture that may take time to change; but it does not necessarily mean that all cross-trades are not 5/18/2015 Page 3 of 6 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Capital Markets Modernization Project (P120321) competitive, either. Therefore, SCS/BSE will conduct more analysis to review the impact of these measures on liquidity, volatility, etc. as near representations of improved price transparency. Intermediate Results Indicators PHINDIRITBL  Ratio of market participants electronically linked to market infrastructure (trading, clearing and settlements) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 100.00 100.00 100.00 Date 15-May-2011 30-Sep-2014 30-Sep-2014 -- PHINDIRITBL  Enactment of a new Capital Market Act (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 15-May-2011 30-Sep-2014 30-Sep-2014 -- PHINDIRITBL  Promulgation of capital markets regulation required upon enactment of Law (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 15-May-2011 30-Sep-2014 30-Sep-2014 -- PHINDIRITBL  Number of companies involved in the listing advisory program (debt and equity) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 1.00 1.00 15.00 Date 15-May-2011 30-Sep-2014 30-Sep-2014 -- 5/18/2015 Page 4 of 6 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Capital Markets Modernization Project (P120321) PHINDIRITBL  Increased of the threshold pass rate of the Financial Certification examination for market participants (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 50.00 75.00 75.00 75.00 Date 15-May-2011 31-Dec-2013 31-Dec-2013 -- PHINDIRITBL  Consumer Awareness of Capital Market Instruments (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 24.00 36.00 36.00 45.00 Date 15-May-2011 31-Dec-2013 31-Dec-2013 -- Overall Comments 4. IRI #1: “electronic access by market participants” has been fully achieved, with a 100% tie-in. The new IT system to be acquired under Component #1 will enforce this feature. 5. Results for IRI #2: “enactment of a new securities law” and IRI #3: “adoption of required implementing regulations” are at zero. However, the SCS is confident that the process has passed the most challenging phase and therefore the remaining process will run smoothly (see discussion above). 6. IRI #4: the “number of companies enrolled in the Listing Advisory Program” improved to 2 by December 2014. As of February 2015, the enrollment increased to 4. 7. IRI # 5 the “increased threshold of the pass rate for professional certification” has been achieved at 75%. 8. IRI #6: “consumer awareness of capital markets instruments” is improving significantly and has exceeded the end-project target. Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P120321 IBRD-80240 Effective USD 12.00 12.00 0.00 6.21 5.79 52% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P120321 IBRD-80240 Effective 17-Mar-2011 22-Sep-2011 07-Nov-2011 31-Dec-2015 01-Jul-2016 Cumulative Disbursements 5/18/2015 Page 5 of 6 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Capital Markets Modernization Project (P120321) Restructuring History Level 2 Approved on 06-May-2015 Related Project(s) There are no related projects. 5/18/2015 Page 6 of 6 Public Disclosure Copy