Rahman Hajiyev: "KRF implements its activities in accordance with the priorities set by the Mr. President"

We present an interview with Rahman Hajiyev the Chairman of the Executive Board of the Karabakh Revival Fund, regarding the financial statements for the year 2021 and the results of the audit conducted by "PwC Azerbaijan" company.

- Mr. Rahman, as reflected in the recently published reports, the Fund has been successful in attracting a sufficient amount of donations. Which portion of these donations comes from companies, individuals or government institutions?

- Before answering your question, I would like to note that "PwC Azerbaijan" company has provided its opinion on the financial statements prepared by the Fund in accordance with International Financial Reporting Standards (IFRS) following several months of ongoing audit. These statements include reports on the financial position as of December 31, 2021, profit or loss for the year ended, changes in equity, cash flows and other explanatory notes, covering the financial statements.

According to the opinion of "PwC Azerbaijan" company, the financial statements accurately reflect the financial position of the Karabakh Revival Fund as of December 31, 2021, and the financial results for the year ended, as well as the movement of cash and cash equivalents in accordance with International Financial Reporting Standards, in all material respects.

As for your question, I would like to mention that since its establishment, KRF has received donations from numerous companies, large entrepreneurs, thousands of individuals and some government institutions. This is undoubtedly a direct manifestation of our people's solidarity.

Regarding the donated amounts, the total donation amount as of December 31, 2021, amounted to 892,206,306 AZN.

Of this amount, 889,781,034 AZN (99.73%) comes from companies and large entrepreneurs, 296,264 AZN (0.03%) from individuals and 2,129,008 AZN (0.24%) from government institutions.

You can obtain more detailed information about this by clicking on the following link:

https://qdf.gov.az/en/ianechiler/

As you can see from the numbers, the largest share of donations goes to companies and large entrepreneurs. However, although the volume of donations made by individuals may not be as large, numerically, these donors constitute the majority. Currently, thousands of individuals contribute to the Karabakh Revival Fund, and this trend is increasing.

 I am sure that, regardless of the amount, each donation is crucial and will play a significant role in the revival of Karabakh.

- You mentioned that government institutions contribute. How do government institutions implement this? Are funds allocated from the budget or deductions from employees' salaries considered?

- This is a very interesting and important question.

First and foremost, it should be noted that currently, apart from the capital allocated in accordance with the decree of the honorable President to the Karabakh Revival Fund, no funds from the state budget are allocated.

The capital mentioned in that decree is equivalent to 1 million manats and is not used for any operations. The Fund covers all expenses from the profits generated from investment activities.

Regarding donations from government institutions, according to the information available to us, donations are primarily made through sources outside the budget. For example, several government institutions implement donations through funds collected within their respective associations.

Of course, it is unacceptable to impose any obligation on citizens working in government institutions to donate, but our most important principle is that donations are made on a voluntary basis. Mandatory deductions from any employees' salaries are not acceptable.

- If legal entities and individuals donate to the Fund, are there any benefits available to them?

- Yes, certain benefits are being applied. One of the amendments made to the Tax Code in 2021 was specifically related to determining benefits for companies supporting funds.

According to the Tax Code of the Republic of Azerbaijan, profit taxpayers are exempted from profit tax up to 10 percent of the profit transferred (donated) to funds created for public and social purposes (e.g., Karabakh Revival Fund, Yashat Foundation) during the reporting period.

The amounts transferred to funds in the form of donations are exempted from profit tax for a period of 8 years from January 1, 2021.

However, it should be noted that the exemption shares of 51 percent and more are not applicable to legal entities directly or indirectly owned by the state and public legal entities created on behalf of the state.

- The information distributed by the Fund refers to the profits obtained from investment activities. What do you mean by profit? In general, in what forms can the Fund benefit?

- According to Clause 5.2 of the Regulation of the "Karabakh Revival Fund" approved by the Decree No. 1253 of the President of the Republic of Azerbaijan dated January 19, 2021, the assets of the Fund can be formed from the endowment of the founder, property of the charter fund, funds allocated from the state budget, income obtained from its activities, donations, grants, attracted investments and other assets not prohibited by law.

Since its inception, the Fund has been placing its freely available assets formed through donations into risk-free long-term and short-term government securities of the Republic of Azerbaijan Ministry of Finance to create additional value.

It should be noted that currently the financing of the Fund's activities (including projects and operational expenses) is carried out based on the profits obtained from these investments.

As stated in the reports approved by "PwC Azerbaijan," as of December 31, 2021, our freely available assets amounted to 314,676,929 AZN have been placed into government securities of the Republic of Azerbaijan Ministry of Finance, and a financial income of 9,198,829 AZN has been obtained from investment activities as of that date.

This income will increase further in the coming years. This means that the efficiency and capabilities of the Fund's activities are gradually increasing.

- Is tax paid on the profits obtained? Or are there any special privileges?

- According to the legislation of the Republic of Azerbaijan, donations transferred to the Fund are exempt from tax, but taxes on profits obtained from investment activities are paid.

It should be noted that the Karabakh Revival Fund has paid 1,728,715 AZN in profit tax to the state budget from the profits obtained from investment activities.

- The financial report of the Fund includes information on donations received, assets acquired, and also information on "impairment loss" related to financial assets. Could you clarify whether this amount is considered a loss, and why is the amount shown as a loss?

- No, there cannot be any real loss. The impairment mentioned is calculated based on the ratings of banks where assets are held in accordance with International Financial Reporting Standard (IFRS) No. 9 and is only reflected in the financial statements.

In reality, this is not any operational loss and does not result in any cash outflow. The mentioned assets are currently held in the Fund's bank accounts.

- The Fund has been operating for over a year now. What restoration and reconstruction projects are currently being supported?

- Firstly, it should be noted that at the current stage of the Fund's activities, the main priority is attracting funds.

Nevertheless, financial support is provided for several projects aimed at the restoration and reconstruction of various objects. I would like to take this opportunity to provide some information about several projects.

For example, with the initiative of the Heydar Aliyev Foundation, and with financial support from the Karabakh Revival Fund, the reconstruction of the bronze statue of Uzeyir Hajibeyli, the world-renowned composer, prominent musician and public figure, and the founder of modern Azerbaijani professional music art and national opera, which was erected in Shusha city, is underway.

Projects supported by the initiative of the Heydar Aliyev Foundation and financial support from the Karabakh Revival Fund currently include the restoration and reconstruction of the Creativity Center building located in Shusha city, and the restoration and reconstruction of the Carpet Exhibition building located in Shusha city.

As the Karabakh Revival Fund, we are working in close cooperation with the Heydar Aliyev Foundation in the direction of restoring and preserving the historical heritage, cultural symbols of our people in Karabakh, and are always ready to support the work carried out with great satisfaction.

We are all aware that since its establishment, the Heydar Aliyev Foundation has set an example in our country in terms of its activities in the direction of preserving and restoring various historical and religious monuments, as well as in presenting gifts for the promotion of Azerbaijan's cultural heritage.

Additionally, the project for the restoration of the forest massif in the territory of Zangilan region, jointly initiated by the Karabakh Revival Fund and the Ministry of Ecology and Natural Resources, is ongoing.

Under the financial support of the Karabakh Revival Fund, a concept for the restoration of the “Imarat Palace Complex” is being developed at the initiative of the Ministry of Culture.

Moreover, with the financial support of the Fund, a concept for the creation of tourism infrastructure around the Shahbulag fortress in accordance with the order of the State Tourism Agency will also be developed.

It is important to note that, at the initiative of the Karabakh Revival Fund, the project for the creation of the Central Park in Fuzuli city is currently being implemented.

We will provide more detailed information about these and other projects to our public in the near future.

- It's interesting, do our compatriots living abroad and foreign citizens also make donations to the Fund?

- Yes, our compatriots living abroad also donate to the Karabakh Revival Fund to contribute to the restoration and reconstruction process. However, the percentage of these donations is not very high yet. But I must note that our communication so far has mainly targeted the domestic audience.

Currently, establishing connections with our compatriots living abroad and, in general, with international organizations is also on the agenda.

It should be noted that a while ago, a Memorandum of Cooperation was signed between the State Committee on Work with Diaspora of the Republic of Azerbaijan and the Karabakh Revival Fund.

The Memorandum aims to inform the international community about the damage caused to the cultural heritage, natural resources, and biological diversity of Azerbaijan as a result of the Armenian occupation, and to support the restoration works carried out in Karabakh by donations from Azerbaijani diaspora organizations, as well as other nations' representatives, and to promote public-private partnerships.

- What plans are being made in terms of cooperation with international institutions?

- First of all, I would like to emphasize that the volume of damage inflicted on Karabakh can only be compared to the damages experienced by European countries after the First and Second World Wars.

As noted by the President of the Republic of Azerbaijan during the consultation dedicated to the results of the first quarter of this year on April 12, typically after such bloody wars and destruction, donor conferences are held, international organizations gather, and a reconstruction plan is implemented.

If we look at the history of the Second World War, we can see the adoption and implementation of the "Marshall Plan".

As noted by the head of state, if America had not implemented this plan to rebuild Europe, Europe might have been able to recover its potential within 50 years.

However, no one has provided us with any assistance, neither during the occupation period nor afterwards. As the President mentioned, we are restoring the liberated territories with 100% of our own resources.

This is a manifestation of the double standards still prevailing in the world.

But this does not mean that we should accept this situation. Relations should be established with international organizations, large funds and international non-governmental organizations engaged in charity to attract their attention to the issue of the revival of Karabakh.

Concrete directions were also indicated in the recent speech of the President on this matter. Therefore, the activities of the Karabakh Revival Fund are carried out in accordance with the priorities determined by the President.

Certainly, it is crucial for the establishment of cooperation with international institutions that the Fund's activities are based on principles of transparency. We understand this, and that's why we have chosen external auditing by one of the leading audit firms in the world.

We are confident that the Fund's activities based on transparency and modern corporate governance principles will greatly contribute to the establishment of our cooperation with international institutions.

- What issues have been identified as priority directions for the activities of the Fund in the near future?

- The priority directions of the Fund's activities for the near future have been determined in the document titled "Scope of Strategic Activities 2022-2025" approved by the Fund's Supervisory Board.

Firstly, it should be noted that providing financial support for the restoration and reconstruction of the liberated territories, including the restoration of the cultural heritage, ensuring sustainable resettlement of internally displaced persons (IDPs) and new residents, and addressing the environmental damage caused by the Armenian occupation in Karabakh, as well as promoting investment and entrepreneurial potential in Karabakh, are among the main priority directions of the Fund.

Furthermore, the Fund intends to contribute to the development of society as a whole. Therefore, initiatives stimulating research aimed at analyzing the future opportunities of the liberated territories and developing the skills and knowledge of the residents settled there will also be given importance.

Moreover, as a Fund that operates on progressive management principles, it aims to create long-term and sustainable additional value for the liberated territories and the entire Republic of Azerbaijan, striving to be an exemplary and responsible investor and capitalize on investment opportunities to positively impact our society.

More detailed information about these directions can be found at the following link: (https://qdf.gov.az/prioritetler/)

I would like to emphasize once again that the revival of Karabakh is one of the crucial tasks facing our nation, and to achieve the goals ahead of us, we must unite around the President of the Republic of Azerbaijan, Mr. Ilham Aliyev.

I am confident that only together can we restore this beautiful region even more beautifully.

Source: “AZƏRTAC” Dövlət İnformasiya Agentliyi