Industrialization Process has Stepped into a New Stage in the
Economy of Azerbaijan
Mr. Minister, Azerbaijan is one of the leading states according to its economic indicators. We ask you to provide the readers of "AZERBAİJAN TODAY" magazine with wide information about the current situation and development prospects in Azerbaijan's economy, please.
As a result of successful pursuance of National Leader of Azerbaijani People, Heydar Aliyev's socio-economic development strategy by President Ilham Aliyev, a socially-oriented market economy has been estabished in the country and Azerbaijan has held its praiseworthy place in the world economy.
It is not coincidental that, Azerbaijan ranked the first place in the world for the average annual growth rate (20.8%) of Gross Domestic Product (GDP) in the years of 2005 and 2009.
During 2004-2009, the volume of GDP has increased 2.8 times, non-oil sector increased 1.9 times, industrial sector 4.2 times and trade turnover 2.8 times, as well as the export increased 3.9 times and increase in import reached to 1.7 times. The volume of budgetary resources was increased 4.8 times, average monthly wage raised 3 times in country, incomes of the population 3.4 times and its per capita volume 3.2 times, increase in minimum amount of pension was 3.8 times, minimum wages was increased 6.3 times in order to implement measures aimed at strengthening social protection of the population during this period. As a result of deliberate measures, poverty rate was reduced 4.1 times droping to 11% in the last 5 years.
The global financial-economic crisis in the world proved the sustainability of country economy again. Despite recessions in many countries in 2009, macroeconomic stability, economic growth, and increase of social and economic welfare of population continued and the GDP grew by 9.3% in Azerbaijan.
High economic growth rate was also maintained in the months of January-November of 2010. During this period, real GDP growth rate has been 4.5% and GDP worth of 36.6 billion manat was produced in current prices. During 11 months of the last year, a 5.9% growth was recorded in the non-oil sector, and the communication sector expanded by 30.8%, transportation by 4.3%, and construction 10.2% compared to the same period of the last year. An increase by 7.8% was recorded in the non-oil industry during January and November of 2010.
Currency reserve of Azerbaijan has reached USD 29 billion.
Main capital investment in an amount of 7.7 billion manat (more than 15.2% compared to the same period of last year) was directed to the development of economic and social spheres of country on the account of all financial sources during the 11 months of this year. 76.2% of these resources are comprised of domestic investments.
As a result of successful implementation of the targeted state programs, over 36 thousand new enterprises were established and about 900 thousands new jobs (including 643 thousand permanent jobs) have been created in the country starting from 2004.
Currently, Azerbaijan collaborates with more than 140 countries of the world in the field of foreign trade. Despite the ongoing economic crisis in the world, positive tendencies observed in the foreign trade balance of the country continue. Positive saldo of USD 13.7 billion generated in the foreign trade balance as of 11 months of this year. Growth on the non-oil export was more than 15% in comparison with the analogous period of the previous year.
Implementation of complex state supported measures such as issuing subsidies, applying tax cuts, broadening leasing services for the purpose of stimulating production in agriculture, which is one of the main areas of the state economy, increasing of capacity of competitiveness, supplying the population's demand for food products on the account of domestic production and extending export have had a positive impact on the development of the agriculture sector and have ensured food security on main products.
Prompt and consistent policy pursued by President Ilham Aliyev has turned Azerbaijan into the transportation junction of the Caspian region and an oil and gas transit country in the international arena. Construction and reconstruction of automobile highways, measures of restoring and improving crossroads in the regions have been undertaken within the framework of transnational transportation projects, including the TRACECA and in the Azerbaijan segment of the International North-South Transport Corridor.
Baku-Novorossiysk, Baku-Supsa, Baku-Tbilisi-Ceyhan oil, as well as Baku-Tbilisi-Erzurum gas pipelines have been put into operation for transporting Azerbaijan's hydrocarbon resources to the world market. It will also be possible to create a direct railway connection between the Europe and Asia after construction of the Baku-Tbilisi-Kars railway and the littoral countries of the Black Sea and Caspian Sea will be able to join the European railway network. 12 new modern power plants were built and opened for exploitation in the last five years and necessary measures have also been carried out in regard to extending the use of alternative and renewable energy sources. In general, the energy security of the country is ensured, more than 85 percent of the country territory has been supplied with natural gas, and Azerbaijan has become an exporter of energy from being an importer.
In addition, a number of substantial measures have been taken in the direction of adapting the management structure of electrical power, gas, water, sewerage and the other public service sectors to the market economy conditions, improving the quality of services and attracting investments. The construction Oguz-Gabala-Baku water pipeline, which is aimed at supplying the capital city's population with uninterrupted water, was completed. The operation of the water pipeline has enabled to supply 75% of population with clean uninterrupted water in Baku.
An entrepreneur class was formed and the private sector's role in socio-economic development of the country has increased thanks to the targeted steps undertaken in the direction of developing entrepreneurship and further improvement of business and investment environments. At present, nearly 85% of the GDP falls to the private sector's share.
An effective mechanism of granting favorable loans for investment projects of entrepreneurs on the account of state resources have been structured in order to accelerate the development of the private sector and to render more financial support to this segment. Therefore, lax credits in an amount of 115 million manat have been issued for financing 1430 investment projects in 2010.
Azerbaijan's economic and social successes are highly evaluated also by influential international organizations, and it is regarded as one of the countries with best development prospect. Azerbaijan was declared world's top regulatory reformer in "Doing Business 2009" report published by the World Bank and the International Finance Corporation and our country managed to preserve its position in "Doing Business 2010" and "Doing Business 2011" reports.
According to the classification conducted by the World Bank, Azerbaijan has been included in the group of high-middle income countries since 2009 (the level of high middle income is USD 3946 per capita).
According to the "Global Competitiveness Report" for the years of 2010-2011, Azerbaijan ranked the first place among the CIS countries and progressed by 14 places holding the 13th place among 139 countries based on microeconomic environment stability sub-index.
Furthermore, "Standard & Poor's", an International Rating Agency, raised its prognosis on credit rating of country economy from "stable" to "positive" at the end of 2009 and "Fitch Ratings", an International Agency, upgraded Azerbaijan's rating from "BB+" to "BBB" on long-term liabilities in foreign and national currency in May, 2010.
Currently, our main purpose is to ensure the sustainable economic development of our country. In this direction, issues on maintenance of macroeconomic stability, ensuring the sustainability of social policy, improvement of competitive environment, keeping inflation in an acceptable level, increasing the efficiency of budget expenditures, increasing the competitiveness and intellectual-technological level of the national economy, continuing diversification of the economy, dynamic development of the non-oil sector, ensuring energy, food and environmental security of the country, improving the business environment for the subjects of entrepreneurship activity, accelerating socio-economic development of the regions and minimizing the existing difference between the regions, developing the export capacity of the country, further improvement of the welfare of people, as well as reducing the poverty and unemployment level and strengthening integration of science to production further are targeted as main purposes.
The prognosis on future development of the country is quite optimistic. According to the forecasts prepared for the forthcoming year and the next 3 years, economic growth will make up 3.8% in 2011 and the nominal value of GDP will be 40.2 billion manat (USD 50 billion). On the whole, average annual economic growth is prognosticated to be 7% till the year of 2014. The amount of GDP will increase from USD 5600 (4501 manat) per capita up to USD 7164 (5760 manat) in 2011 and Azerbaijan's position will be more secured among the high middle income countries.
In 2011, real incomes of the population are expected to grow by 6.5%, 10.2% in 2012, 8.1% in 2013 and 8.3% in 2014.
Investments in the country's economy are estimated to amount 11.4 billion manat increasing by 17% and will be 37 billion mantas within the next 3 years. Besides, foreign investments are expected to be 4 billion manat and will reach 16 billion manat by an average annual increase of 10.6% in the upcoming 3 years.
We are confident that President Ilham Aliyev's decisive, pragmatic and calculated policy, political will, administrative talent and the economic potential of our country will ensure to achieve the defined targets.
The non-oil sector is one of the sectors of priority in the Azerbaijan economy. What areas in this sector do you think are attractive to foreign investors?
The non-oil sector of Azerbaijan's economy has great potential from both local and regional point of view. The main goal of the economic and social policy pursued is to realize this potential by taking advantage of it effectively and complex measures are carried out by the state on this purpose.
There are broad prospects for manufacture of competitive products in the agricultural industry, one of the main sectors of Azerbaijan economy. The state support of this sector of economy is quite comprehensive. Proximity to foreign markets, propitious agro climatic resources and availability of sufficient labor forces allows producing competitive products in this sphere. I would specially like to point out the potential for producing ecologically clean agricultural products in the country. At the same time, much more attention is paid to formation of necessary infrastructure on supply and storage of agricultural products in recent years. Construction of cooling chambers, grain warehouses and other infrastructure facilities in the economic regions of the country and agrarian services should also be noted.
In addition to that, there are great opportunities for investments on non-oil sectors such as mechanical engineering, chemical industry, metallurgy, electricity generation, construction materials and light and food industry, too.
Industrialization process has stepped into a new stage in the economy of Azerbaijan.
At the present moment, reconstruction of industrial enterprises technically and technologically, expansion of manufacturing industrial products possessing comparative and competitive advantages, promotion of export oriented products which replace import, as well as building industry clusters and large industrial complexes which operate on raw materials and produce products of export capability are thoroughly supported for the purpose of intensifying the development of the non-oil industry. Important steps are being taken in the direction of stimulating investment-innovation processes, acceleration of application ecologically clean, energy and recourse saving technologies investment. As the result of intentional policy pursued, old enterprises are re-built and new modern ones are established.
Let me note that, new and modern production facilities have already started to function in Techno Park, which was established in Sumgait, one of the main industrial cities of the country.
Furthermore, work has been initiated on establishment of a special economic zone, industrial settlements and business centers in different regions.
One of the sectors which are believed to draw investors' interest is the service sector. Balanced development of the country economy, as well as adaptation of the infrastructure maintenance to the international standards enables to develop transportation services. Currently, mreo attention is concentrated on provision of logistics services in this field. Let me note that, construction of the International Sea Trade Port has already started and it is going to be the biggest port complex in the Caspian basin.
One of the special projects on improvement of the infrastructure, as well as creation of new industry spheres and increasing country's export potential is the ship building factory which was founded in March this year. The factory which will greatly contribute to strengthening of Azerbaijan's economy and our country's industry potential and competitive products manufactured in this factory will allow further expansion of the non-oil sector.
In the meantime time, there is also a large potential for developing tourism by taking the advantage of our country's geographical and suitable climatic conditions. Foreign investors have been deeply interested in this sector in recent years.
I suppose that, the field of information-communication technologies is attractive in terms of foreign investments, too. As a matter of fact, President Ilham Aliyev has declared the information-communication technologies sector as priority spehere following the oil sector.
A fertile investment grounds has been created for the activities of foreign investors by the state and the government of Azerbaijan is pursuing an "open door" policy in this sphere. Hence foreign investors are not required to obtain any special licenses for their activities and they can enjoy equal opportunities created for local entrepreneurs.
In addition, registration of business is simplified in Azerbaijan and a "one stop shop" principle is implemented regarding the state registration of subjects of entrepreneurship and examination of goods and means of transport in the state border check points of the Azerbaijan Republic and the mechanism for state financial support has been improved. Moreover, procedures and rules regulating entrepreneur activity have been considerably liberalized, export duties annulled, a maximum limit of 15% was set for duties on import and profit tax was reduced from 22% to 20%.
The completed work and the measures which are planned to be carried out in this direction in future have made Azerbaijan an attractive country for foreign investors.
How do you assess Azerbaijan's trade relations with the European Union countries?
The European market is interesting for Azerbaijan and the development of commercial-economic relations are carried out within "Partnership and Cooperation" Agreement, which was signed between Azerbaijan and the European Union in 1996, as well as within the framework of multilateral and bilateral relations with the EU member states.
The Action Plan between the European Union and Azerbaijan existing within the framework of the "European Neighborhood Policy" also inspires the establishment of more efficient political dialogue, creation of trade relations with concession and stimulation of investments.
As I noted, the European market is one of the main export markets for Azerbaijan. The European Union member states' share in Azerbaijan's external trade turnover constitutes 38,7%, including 26,7% on imports, 43,7% on exports in 2009. Exports from Azerbaijan to the European Union increased 3.5 times in 2009 in comparison with the year of 2004. Such tendency was also maintained during January and November of 2010 and the European Union's share in Azerbaijan's external trade turnover has been 41,4%, including 24,7% on import, 46,4% on export. The total trade turnover has increased by 45,2% and by 58,1% on export during 11 months of 2010 in compare to the relevant period of 2009. As you know, Azerbaijan is becoming the producer of hydrocarbons and an important transit country for supplying European and world markets with hydrocarbons mined in the Caspian basin and the Central Asia. Baku-Tbilisi-Ceyhan oil pipeline provides big opportunities for delivering great volume of crude oil of Azerbaijan and the Caspian basin countries to the European markets. In the meantime, transfer of Azerbaijan's natural gas to the European markets is considered one of the priority issues in future cooperation. At this point, I would specially like to note reconstruction of the Great Silk Road and Euro-Caucasus-Asia transit corridor (TRACECA). The Euro-Caucasus-Asia transit corridor is especially important within the framework of TRACECA Program - in terms of ensuring delivery of goods and rich natural reserves produced in the Asian countries to the European markets in short period of time and under suitable conditions in compare to other routes.
As non oil sector is one of the priority issues, Azerbaijan is interested in bringing products and services of this sphere to the European markets. Azerbaijan has gained broad privileges by joining "GSP+" program, the highest stage of concession trade system introduced by the European Union, with the status of beneficiary country in 2009. Thus, Azerbaijan has gained a concession export opportunity to the European markets with more that 7000 choice of goods which is very significant in terms of broadening our country's export potential and diversification of export structure. In order to make an efficient use of the program and ensuring non-oil export products to meet the EU standards, the Ministry of Economic Development, together with the European Union's support project, has organized some seminars for entrepreneurs in Baku and regions of Azerbaijan and informed them about the advantages of the "GSP+" program. Such events are supposed to take place in future, too.
Azerbaijan is closely collaborating with the European Union on the membership to the World Trade Organization, too.
I think relations between Azerbaijan and the European Union will extend further consideting the existing favorable situation.
Azerbaijan Today magazine