ON THE GROWTH TRACK

Azerbaijan 2012 | ECONOMY | INTERVIEW

TBY talks to Shahin Mustafayev, Minister of Economic Development, on GDP growth, FDI, and the country's role as a transport and energy hub.

HE Shahin Mustafayev
BIOGRAPHY
Shahin Mustafayev began his career as the Chief Accountant at the Baku Head Construction Office, from 1991 to 1992, while at the same time performing a similar role in start-up company Spektr. From 1992 he moved over into the public sector full time, eventually becoming Chief in the Office of Economical Analysis and Organization of Accounting, attached to the Ministry of Taxes. From 2000 he joined the State Oil Company of Azerbaijan Republic (SOCAR), eventually becoming a Vice-President. In September 2006 he joined the government as First Deputy Minister, and since October 2008 he has been the Minister of Economic Development.

Azerbaijan's GDP per capita is steadily growing, reaching over AZN4,700 in 2011. What does this growth signal about Azerbaijan's overall economic development?

Over the years, Azerbaijan has achieved a high level of stability and sustainable development, establishing a successful socio-economic model. The country is also working toward preserving stability in the non-oil sectors and ensuring economic growth in the regions, which offer great potential to various segments of the economy. The regions have also been instrumental in the development of SMEs, infrastructure, poverty reduction, and human capital. It is no coincidence that Azerbaijan remained resilient during the global economic crisis. Azerbaijan's rapid GDP growth between 2004 and 2011 can be attributed to efforts aimed at diversifying the economy, as industrial production has increased by 2.7%, agriculture by 1.3%, construction by 3.2%, transport by 2.3%, ICT by 6.4%, and trade by 2.6%. Successful industrialization, institutional, and investment environment policies have been implemented, and we have seen an expansion in production capacities and infrastructure. In this regard, it is important now to support the development of Azerbaijani enterprises in order to attract more FDI. One of the most important features of the national socio-economic development model is the development of the private sector through the implementation of state programs to encourage entrepreneurship, as well as the creation of an entrepreneurial infrastructure. As a result of the dynamic development of the private sector today, more than 80% of GDP production is provided by the private sector, and both domestic and foreign investment have increased by 4.6% and 2.1%, respectively, since 2003. Azerbaijan has achieved an expansion in the volume of its foreign trade, and fostered economic relations worldwide. At present, Azerbaijan is trading with more than 150 countries, having increased foreign trade turnover by 6.4% in the last eight years. During the same period, the average income has also increased by 5.3% and more than 1 million jobs have been created.

How has FDI influenced the development of Azerbaijan's national economy? What strategies is the Ministry following to further attract FDI in the coming years?

Between 2003 and 2011 Azerbaijan received $100 billion in investment, and half of it was FDI. We have seen the active participation of foreign investors in different sectors of the economy, especially in the non-oil sectors. Azerbaijan currently offers a very favorable business environment for foreign investors. It boasts a favorable legal system, mechanisms to protect the rights and interests of investors, and respects the inviolability of property. We are constantly working on improving the legal framework to attract more investment in the future. In addition, we have developed agreements with many countries to promote and protect mutual investments. We have also worked to resolve double taxation issues. Azerbaijan offers many advantages for foreign investors such as a competitive private sector, ease of starting a business, and a simplified business environment. The World Bank and other international institutions have positively recognized such trends, and Azerbaijan has been recognized as the most competitive economy in the CIS in the World Economic Forum's Global Competitiveness Index 2011-2012. Azerbaijan has been growing sustainably over the last 15 years, and large amounts of investment have flowed into the country. The many major regional and international infrastructure projects that have been developed also speak volumes for the favorable investment conditions in our country.

How would you assess Azerbaijan's role as a regional economic, energy, and transport hub?

Since the “Contract of the Century" was signed in 1994, Azerbaijan has achieved a leading position in the energy sector through the development of large-scale agreements and projects. It has become a key player in providing energy security and creating the basis for international cooperation in the Caspian Sea region. Oil strategy policies have also been the locomotive for the development of other sectors of the economy. Thanks to prudent national policy, Azerbaijan has developed into a transit point for oil and gas, sitting in the middle of international transport corridors such as the Transport Corridor Europe-Caucasus-Asia (TRACECA) and the North-South Corridor. We have also been working toward developing the road, rail, and air networks, strengthening the transport system, and making efficient use of the country's resources. At present, we are working on the Baku-Tbilisi-Kars railway and the Baku International Sea Trade Port, as well as other transport links. In this regard, I would like to stress the importance of the synergies we constantly create with other ministries in order to develop Azerbaijan's international potential.

What economic challenges does Azerbaijan face in terms of stimulating further economic growth?

In order to ensure macroeconomic stability, economic diversification, business development, and a favorable business environment, we need to keep implementing measures to improve the economic fundamentals of the non-oil sector and national infrastructure. Our priorities for the future will be energy, food, and environmental safety, while minimizing dependence on the oil and gas sector and maximizing the diversification of the economy. We also aim to further develop the agriculture sector, with special attention on intensive methods. In addition, we will be focusing on further improving the business environment, creating special economic and industrial zones, and strengthening our support for business entrepreneurship. Once Azerbaijan completed its transition to a market economy, it entered a new stage of development, and the main objective now is to increase production capacities and competitiveness, as well as develop an export- and innovation-oriented economy.