TO OVERCOME THE "DUTCH SYNDROME"

Azerbaijan has overcome the "Dutch syndrome" and is on its way to diversification of its economy. The country's major goal in subsequent stages of development is to strengthen its economic potential on the basis of an export-oriented model. For this purpose the government is ready to continue implementing additional measures to reinforce the country's involvement appeal in order to interest foreigners not only in investing their financial resources in Azerbaijan but also bringing brand new technologies and know-how, sharing good practices, training local specialists and so on. 

These particular issues were in the focus of discussion at "Azerbaijan Investment Summit: 2020 and Beyond - Accelerating Economic Development" organized by The Economist magazine and held in Baku last week. 

Azerbaijan has managed to avoid errors made by countries rich in natural resources and the "Dutch syndrome", Sahmar Movsumov, executive director of the State Oil Fund of Azerbaijan (SOFAZ), said at the summit. According to him, "one of the 'Dutch syndrome' factors is strengthening local currency which leads in turn to export reduction. Azerbaijan has avoided this". Of serious importance are also savings of the State Oil Fund of Azerbaijan, S.Movsumov said. "In addition, the share of the oil industry in the GDP used to be 60 per cent. Now this indicator has declined to 40 per cent," S.Movsumov said. 

So Azerbaijan ranks today among the world's 10 most stable economies. "Azerbaijan's GDP has increased more than trice over the past few years. It is of special importance that this happened against the background of the global crisis. This is just the reason why many foreign financial institutions have confirmed that Azerbaijani is one of the world's 10 most stable economies," Rufat Mammadov, president of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO), said in his speech at the summit. In his opinion, one of the most important stability factors in this development is its predictability. In this context, of decisive importance in the country's further economic development is the development concept "Azerbaijan 2020: A Look into the Future" mapping out not only the objectives and goals facing the country but also ways to achieve them. Meanwhile the government is paying a lot of attention to diversification of the economy. "The programme will spotlight attention on transport, logistics and development of the regions. The top priority is human capital. In the future, the farming and processing sector will account for 45 per cent of the GDP. The tourist sector has been bringing income in recent years and this attracts foreign investors to this industry. The ICT sphere has gone through a big phase of development," said R.Mammadov, adding that, thanks to diversification, Azerbaijan has reduced risks to its economy. 

This is definitely one of the most important factors making this country attractive to investors. Moreover, the declared indicators are regularly confirmed by high ratings from influential agencies and financial institutions. For instance, according to R.Mammadov, Azerbaijan's positions are steadily on the rise in terms of the World Bank's Doing Business report. "We keep foreign investors on a par with local ones creating the same conditions for them and I can say that quite a lot of investments have been made as of today," the AZPROMO head said. 

To confirm his words, he said that Azerbaijan has trade relations with 140 countries and all necessary infrastructure to develop them. 

In principle, SOFAZ executive director S.Movsumov said, Azerbaijan is a small country with a limited domestic market, so an export-oriented economic model is the most suitable for it. At the same time Azerbaijan provides good opportunities for foreign investors making big investments in efforts to develop and improve the infrastructure, transit potential and business environment. Coupled with a favourable geographic situation, this is a motivating factor. 

The fact is not denied though that there are some problems and flaws in this area. For instance, Nargiz Nasrullayeva-Muduroglu, director of the American Chamber of Commerce (AmCham) in Azerbaijan, holds the opinion that, to make Azerbaijan more attractive for foreign investors, the government should simplify the issuance of business visas to them. "The government has somewhat simplified the issuance procedures for tourist visas but there still remain certain difficulties with business visas," she said. It is also necessary, in her view, to continue reforming the customs system and encourage foreign companies' practices to employ labour. Moreover, according to her, active transition to electronic document management is under way and it should be completed in order to simplify business registration procedures. Asked to specify the main sectors to develop for economic diversification, the AmCham director named information technologies, transport, agriculture and tourism. All these spheres, she said, have great potential. 

It should be noted here by the way that the government is already taking additional measures to encourage the development of Azerbaijan's export potential. Thus, according to Sahin Mustafayev, the country's minister of economic development, Azerbaijani businessmen will need only two documents to carry out export-import operations. "As is known, as a result of reforms aimed at liberalizing export-import transactions, the one-stop principle has been used in examination of cargoes and transport vehicles crossing the border since 1 January 2009; the new Customs Code has again simplified administrative procedures involved in those operations," S.Mustafayev said.  

According to the minister, in keeping with the decree "On additional measures to develop entrepreneurship", reforms in this sphere will continue. "Thus, according to amendments to a number of regulations for import and export customs clearance, only transport documents and the declaration itself will be required. Thus the number of required documents will be reduced to two for import and export from the current 11 and eight, respectively. The general list of required documents will be shortened from 19 to four," S.Mustafayev said. 

Thus a set of measures ranging from support to export-oriented production to simplifying immediately the procedures for selling the products abroad will provide the basis for carrying out plans for diversification of Azerbaijan's economy in the next few years. Foreign investments, technologies and expertise will be an additional factor to accelerate this process.