CORPORATIONS UPPING INVESTMENTS

According to data from the State Statistics Committee, positive investment dynamics have again been registered in Azerbaijan since the beginning of the year. Backed by state and private sources of financing, the growth rate in investments in the country's economy has reached seven per cent. At the same time, this growth is characterised by a comparatively new trend. Just as in 2012, the total volume of corporative investments in the main capital, albeit not a significant sum, have exceeded investments made by the treasury.

The stability of the macro-economic indices and the favourable business climate that has taken shape in the country are allowing Azerbaijan to retain leading positions in the region with regard to attracting investments at home and from abroad.  Last year alone, 28bn dollars were invested in the country's economy, of which 17.5bn dollars were home-grown investments. This is a record figure. Never before has the volume of investments in the country's economy risen to such a level in just one year.

Investment rates have been boosted even further in the first quarter of this year. According to figures from the State Statistics Committee, from January to March 2014 something like 3.126bn manats were invested in the country's economy, which is seven per cent more than in the similar period last year. Investments from abroad accounted for 32.5 per cent or 1.016bn manats, while internal capital investments exceeded 2.109bn manats or 67.5 per cent.

The proportions quote above, when investments at home consistently amount to two thirds, and even three-quarters of all capital investments, have remained stable for four to five years now. "The extremely positive investment climate in the country is allowing Azerbaijan to retain a leading role among the former Soviet republics in the volume of direct foreign investments. At the same time, the level of domestic investments has been greater than that of foreign investments for several years now. Just as before, we are interested in consistently attracting capital into the country's economy, but it is no less important that this financing should be channelled into what are strategically important sectors for the state and should be in line with the government's overall economic policy," Azerbaijani President Ilham Aliyev, has stated. Properly speaking, this is why the government has tried in every possible way to stimulate investments at home, which have become a key tool in developing the non-raw materials' sectors of the economy over the last few years. By way of example, we can note that in the past five years alone, more than 20,000 enterprises have been commissioned in Azerbaijan, most of which were in the energy sector.

Over the last few years, moreover, a stable preponderance of treasury investments over corporate ones has been observed. The latter can be explained by the government's consistent policy aimed at financing the infrastructure and development of the regions from the state budget, as well as noticeable activity on the part of state companies making their own investments in strategically important industrial projects. This policy has been indirectly responsible for an invaluable contribution to maintaining the high growth rates (on average 10 per cent) in the development of the non-oil sector of the economy, providing private construction firms and contracting companies with multi-million orders. Just as before, the investment vector is definitely focussed on the development of industry, and this trend remained stable from January to March this year. So, over the period under review 1.396bn manats was channelled into the energy sector (43.8 per cent), while the non-oil sectors accounted for more than 1.756bn manats, or 56.2 per cent of all the capital investments.

But, judging from the latest statistics, the ratio between state and private investments is undergoing certain changes. For example, in the first quarter of this year state-owned enterprises and organisations invested more than 1.547bn manats, which was 49.5 per cent of all investments, while private investors (both local and foreign) invested just a little less than 1.579bn manats or more than half of all investments. In spite of the small difference, the investment activity of the corporative sector was greater than that of the state. This is a comparatively new trend, since the position of the state structures and treasury funds as leading investors in the economy in the post-recession period did on the whole remain the dominant one.

Proceeding from the figures for the first quarter, attention should undoubtedly be paid to the long-existing practice, according to which the actual beginning of the new financial year does not coincide with the beginning of the calendar year. Therefore, in the first one and a half to two months the majority of state-owned companies and treasury-funded organisations are not markedly active in making investments. Correspondingly, this fact means that some amendments need to be made to the overall strategic figures.

The change in the ratio of state to corporative investments is to a large extent the result of the government's new approaches to treasury and investment policy aimed at optimising expenditure. In particular, this is a question of amendments made to the State Oil Fund budget.  In accordance with the changes, the Fund's expenditure this year is to amount to a little over 10.59bn manats, as compared to the earlier envisaged almost 11.35bn manats. Moreover, direct receipts to the country's treasury this year are to amount to 9.34bn manats, for the first time falling by 18 per cent or 2.13bn manats compared with the figure for 2013.

Such a conservative approach to the expenditure of currency reserves will continue in the future and that is one of the basic tasks formulated by President Ilham Aliyev. The idea is that in the near future the day-to-day expenditure from the state budget should, in the main, be covered by tax receipts from the non-oil sector, and transfers from the State Oil Fund have primarily been channelled into financing major investment projects.

As far as the new directions in state investments are concerned, as noted in the recent report of the Asian Development Bank - the Asian Development Outlook (ADO 2014) - there are still quite a few spheres in Azerbaijan where incomes from oil could be invested to stimulate other forms of activity. Among them, there is the state programme for developing Greater Baku and the regions, rendering support to the farming sector and in particular bringing unused land into the agricultural turnover.