BAKU A year ago the Minaret Investment Group cracked open the champagne and served up caviar in small mountains as it threw open the doors of its swanky new offices at Baku's most desirable corporate address. But today the office is all but empty and 90 percent of the staff have gone. The company, which boasted former U.S. Senator George Mitchell among its board members, has become a victim of the slow, uncertain pace of large-scale privatization in this former Soviet Republic. We came and looked and thought we had very good prospects here, said Minaret's newly-appointed Managing Director Tanvir Aftab. We built up a whole crew with the assumption that something would happen in 1998.

It was a high-risk strategy. According to the Wall Street Journal, Minaret's controversial chairman Viktor Kozeny, who made his name buying up major state enterprises for a song in the Czech Republic in the early 1990s, pumped some 100 million dollars of his own into Minaret. The firm, which says it invests on behalf of some of the biggest names on Wall Street and in the city, planned to expand its Baku staff to 250 and beef up its other offices throughout the Caucasus and Central Asia. The firm's traders have already shelled out close to 200 million dollars, insiders say, snapping up around 25 percent of Azerbaijan's eight million privatization books, which each Azerbaijani received to invest or sell for profit.

But the bold ploy has been sabotaged by bureaucratic haggling which has stalled the highly-anticipated sell-off of the country's blue-chip companies, including a portion of the state oil company Socar. Minaret, hit hard by investors' worldwide retreat from emerging markets and Azerbaijan's own economic problems, found itself supporting a staff of 185 with the local securities markets going nowhere. Rival brokerage houses global securities from Turkey and Anglo-American AJG investments have similarly cut back.

According to State Property Deputy Chairman Barat Nuriyev, Minaret's diminished presence on the investment scene deals a blow to the privatization process. It goes without saying that it is bad that Minaret is cutting back, said Nuriyev. It is a very bad sign, and I hope the government understands this. The official added that as Azerbaijan has been deprived of hard currency by the collapse of world oil prices, the government needs to launch large-scale privatization urgently to channel much-needed funds into the budget.

Yet officials are still thrashing out the basic lines of the privatization program, though the document should have been submitted to President Heydar Aliyev for signing by the end of 1998. Aliyev for his part wants Parliament to enact legislation removing a string of legal sticking points before he signs any program into law, Nuriyev said. Official forecasts that auctions could start in early summer appear optimistic.

Azerbaijan sold off around 90 percent of its small businesses in the first round of privatization, earning 78 million dollars for state coffers. But the economic crown jewels have remained firmly in state hands. Prices for privatization books, each containing four vouchers, have plummeted on the open market from a high of approximately 100 dollars in March 1997 to a little more than 15 dollars today.

Even with a new program outlining timings and firms to be auctioned, investors could wait months before they are able to bid for the state gas, oil, energy, telecommunications, or fishing firms. Even now it is not too late, people are still interested Aftab, said, adding that Minaret is keeping a skeleton staff in Azerbaijan ready to pounce when the sell-off is launched.

But we will be disappointed if nothing substantial happens by the third quarter this year, he said. (AFP)