Vugar Bayramov, Chairman of the Center for Economic and Social Development, comments on the need for economic diversification and the role that investment can play.
Azerbaijan is attempting, simultaneously and unevenly, to complete the consolidation of its sovereignty, create both a national and international identity, construct a healthy civil society, and establish a viable market economy structured with respect for the rule of law. This is a complex and multifaceted development, which provides the Center for Economic and Social Development (CESD) with potentially huge work to be done toward achieving its economic and social development priorities. The CESD, therefore, concentrates on several intertwined research facets for policy reform and tries to develop a better institutional capacity to consistently address these issues and provide more of the high-quality work needed.
In recent years the opportunities for think tanks to affect economic policy in the country have increased. Both the attraction of the CESD to the preparation of various programs, and the adoption of various programs and strategies developed by the Center, indicate that our leading think tank’s opportunities to impact state policy are growing. The government’s adoption of 10 proposals prepared by the CESD in 2010 denotes that the Center has the capacity to influence public policy. Currently, the government of Azerbaijan is looking to cooperate more with public think tanks. A number of strategies prepared by the CESD have been presented to the National Assembly for discussion, and this additionally confirms that the government’s intentions to cooperate with think tanks are growing. Additionally, anti-corruption measures have been launched, and some steps have been taken to remove monopolies.
Azerbaijan’s economy is among the fastest growing in the world, with 2009 GDP growth estimated at 9%. Although net exports, fuelled by substantial new oil and gas production, remained the major drivers of growth, the non-oil sector has also recorded positive growth. Booming oil export prices and the contractual shift in the profit-sharing ratio of the oil consortium in favor of the government in 2010, have all contributed to a major strengthening in the external position and to the accumulation of substantial foreign assets. The global financial crisis has also important implications for oil revenue management and overall macroeconomic policy. An increase in oil revenues over the last five years resulted in the improvement of macro-economic indicators. Azerbaijan’s GDP reached AZN41.6 billion in 2010, a large increase from the AZN2.7 billion GDP level recorded in 1991.
Using oil revenues, the development of other sectors can be achieved and as a knock-on effect those sectors would be less dependent on oil. The government has been implementing an “open door” policy to draw investments to the country’s economy for a couple of years. Reforms have had some positive impacts. Improvement of the economic opportunities of the country has brought important changes in the structure of total investment. The amount of internal investments has prevailed over external investments. Internal investments constitute AZN7.31 billion or 75.2%, and external investments constitute AZN2.41 billion or 24.8% of the allocation directed toward fixed capital.
Changes in the legislation and also the simplification of the registration process for enterprises has created a good atmosphere for foreign investors. Now, foreign investors can participate in privatization efforts. As is understood, a change has occurred from a progressive system to a proportional system in terms of income tax for entities and organizations. The amount of investments directed toward the country constitute $95 billion, with $50 billion coming from foreign investors and $45 billion from internal
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