OF MUTUAL INTEREST
TBY talks to Shahin Mustafayev, Minister of Economic Development, on trends in the national economy, growth sectors, and international trade.
BIOGRAPHYShahin 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.
What have been the main trends in the economic development of Azerbaijan throughout 2012?
Like in previous years, 2012 was a success for Azerbaijan. Despite the global financial crisis of recent years, we have ensured macroeconomic stability, the diversification of the economy, the balanced development of the non-oil sector, and regional acceleration. Measures for the further improvement of the investment climate have continued in the wake of the purposeful policies that have been carried out. In 2012, GDP growth was stable at 2.2%, and the non-oil sector increased by 9.7%. Internal investment amounted to $13.3 billion and foreign investment was at $8.8 billion. Foreign trade turnover rose to $39.5 billion, and non-oil exports increased by 11.2% over this period. Inflation was steady at 1.1%.
What are the main strategic priorities to boost GDP growth in Azerbaijan in the coming years?
The main distinctive feature of Azerbaijan's economic development over the last few years has been the maintenance of GDP growth within the non-oil sector. The development concept “Azerbaijan 2020: Outlook for the Future" was prepared to ensure the strengthening and sustainability of the achievements attained in the country's economy. The objectives put forward in the concept are increasing the competitiveness of the economy, improving its structure, and developing social spheres and human capital. An export-oriented economic model is one of the tenets of this concept. The improvement of the competitiveness of the economy, the development of the logistics infrastructure for the regions and Baku suburbs, and the expansion of the ICT sector have been set as key strategic directions to increase GDP in the coming years. The Baku-Tbilisi-Kars railway project will play a crucial role in the realization of the transit potential of our country and its continued success.
The ICT sector of Azerbaijan's economy is now the second largest recipient of foreign investment. What are the other sectors that the government intends to further develop?
The non-oil sector of the Azerbaijani economy has great potential for development. The ultimate goal of the economic and social policy is to ensure diversification by using these opportunities efficiently. Measures are being taken to reduce the dependence of the economy on the oil sector, maintain the balanced development of the non-oil sector, use the natural resources and potential of the regions efficiently, combine infrastructure with modern requirements, create a wide range of opportunities for entrepreneurship development, and further improve the investment climate. Industry is one of the leading fields of the Azerbaijani economy. A favorable institutional and investment environment has been created to develop industry and the production capacity of enterprises. In addition, fields such as engineering, chemistry, metallurgy, energy, FMCG, ICT, tourism, transport, and agriculture have great development potential. Azerbaijan has rich deposits of ferrous and non-ferrous metals, rare metal ores, non-metallic raw materials, and construction materials. Moreover, our country has the perfect natural climatic conditions for improving alternative and renewable energy generation systems through utilizing wind, water, and solar energy. As a part of the industrialization policy, modern technoparks, industrial parks, as well as chemical, industrial, and high technology parks in Sumgait and Balakhani are being established.
Tourism also has great potential in our country because of its history, geographic location, and favorable climatic conditions. In recent years, new modern hotels and resorts have been built in Baku and the surrounding regions. The construction of the Shahdag Summer-Winter Tourism Complex will contribute to the development of skiing and other winter sports in the country. The development of tourism along the Caspian Sea will pave the way for the expansion of tourism services in our country.
Which countries are you focusing on to strengthen bilateral and multilateral relations?
Integration into the world economy and the expansion of relations with foreign countries and international organizations are key to our socioeconomic development strategy. Delegations from Germany, the Netherlands, the UAE, Hungary, Argentina, Serbia, Belarus, Kazakhstan, Slovenia, and Indonesia, as well as many regions of the Russian Federation have attended events hosted by the Ministry of Economic Development in 2012. During these visits, meetings, business forums, and presentations were held, and discussions took place on issues such as the development of economic cooperation, the expansion of trade relations between countries, and reciprocal investment flows. Along with this, we sent large delegations to Turkey, Georgia, Tajikistan, Jordan, China, Hungary, Croatia, and Albania to boost economic relations with partner countries and discuss issues of mutual interest. Bilateral meetings and business forums were organized during the visits. All of these serve to expand Azerbaijan's foreign economic relations, improve commercial affairs and reciprocal investment flow, and establish ties among businessmen.
What have been the most significant economic developments in the country over the past decade?
I think that successfully implementing a domestic and foreign policy, consistent reforms in the economic sphere, measures on state support for entrepreneurship, and a favorable business and investment climate have all paved the way for Azerbaijan to be known as the leading reformer in the world for its economic development rate. GDP grew by 3.4 times, and the non-oil sector by 2.7 times. The role of the private sector further increased in the country's socioeconomic development, with its share in GDP now constituting 83%, and in the agricultural sector it is up to 100%. More than 1.2 million new jobs have been created since 2003 as a result of the measures taken to eliminate poverty and unemployment. Accordingly, Azerbaijan entered the list of medium-high income countries. Fixed investment increased by seven times, and investments directed to the non-oil sector rose by 18.7 times over the 2003-2012 period. Crucial success has been achieved toward creating economic relations with different countries and boosting foreign trade volume. Today, Azerbaijani products are exported to different countries, including developed countries, and the range of exported products is growing constantly. At present, Azerbaijan cooperates with over 150 countries in the field of trade. Azerbaijan's foreign trade turnover was augmented by seven fold, exports by 10.3 fold, and imports by 3.7 fold between 2004 and 2011. The rapid development of the Azerbaijani economy sparked an increase in the financial capacities of our country and investment in the economies of foreign countries. Azerbaijan has invested billions of dollars in Turkey, Georgia, Russia, Uzbekistan, Ukraine, Romania, and Switzerland. Azerbaijan has become a reliable partner in terms of maintaining the energy security of Europe by turning into an energy exporter from being an importer. The world's major rating agencies—Fitch, Standard & Poor's, and Moody's—upgraded Azerbaijan's credit rating, each granting the country investment grade and grading their prognosis as “stable." Azerbaijan is the first and only country in the region to achieve investment grade. The Global Competitiveness Report 2012-2013 by the World Economic Forum ranked Azerbaijan 46th among 144 economies around the world. Azerbaijan has been holding the leading position amongst CIS countries for four years now. According to the World Bank's 2013 Doing Business report, Azerbaijan ranked 67th among 185 countries on the ease of doing business. It shows once again that the socioeconomic policy comprising development and durability will maintain Azerbaijan's sustainable development and strengthen our country's position in the world.
What are the Ministry's medium-term plans to ensure economic sustainability?
The directions of development strategies and strategic objectives over the long term have been determined, and the “Azerbaijan-2020: Outlook for the Future" development strategy has been established to reach these objectives. Crucial goals include maintaining a high level of social welfare, turning Azerbaijan into an economically and socially developed country, ensuring sustainable development of the non-oil sector, and further accelerating the sustainable and balanced development of the regions. Another crucial goal includes improving the living conditions of the people, especially strengthening the social protection of those on low incomes. These plans also look to provide the population with communications, internet, banking, and public utility services, as well as roads and high-quality health care and education. We seek to minimize unemployment, reduce the level of poverty, increase the income of the population, and establish the presence of enhanced human capital. In order to realize these goals, measures to improve the structure of the economy, modernize the oil and gas sector and petrochemical industry, diversify and develop the non-oil industry, and expand the opportunities for the use of alternative and renewable energy sources will be taken. We aim to develop the agricultural sector and strengthen food security, boost trade and services, improve the structure of foreign trade and investments, and develop transport, transit, and logistics infrastructure. The 100% application of e-government services in the country will also be the center of attention as the one of the main priorities.
As the main goal of economic development is the development of social welfare and the improvement of the social sphere, human capital will remain a priority. Enhancing the quality of education and health, strengthening the social protection of the population, ensuring gender equality and family development, and raising the potential of the youth and sports are among the priorities set forth. The preservation of cultural heritage, its effective management and preservation, and the enrichment of new creative solutions for environmental and ecological problems are also key policy targets.