A ROAD SEVEN YEARS LONG

Azerbaijan has completed the transition to market-based economic relations. This fact was declared by the country's leadership and recognized by international institutions as early as 2009. However, it was also recognized that the current economy is built not only and not so much on the generally accepted rules of the market economy. Azerbaijan has offered its own model of development, which has successfully proven itself over the years of independence. Finishing 46th among 144 countries in the Global Competitiveness Report published by the World Economic Forum, Azerbaijan proved to be the most competitive economy in the CIS. And according to the UN Development Program's Human Development Report for 2010, Azerbaijan left the group of countries with "medium human development" and joined the group of countries with "high human development".

But the achievement of one global goal should be followed by the definition of another. And the goal set by President Ilham Aliyev to the government is to double the GDP growth per capita and bring it up to $13,000 by 2020. Moreover, the upcoming seven years should become a completely new stage in the country's development. At the end of last year, the head of state approved the concept "Azerbaijan 2020: a look into the future". The achievement of social and economic goals established under the concept requires a highly efficient economic system that is sufficiently competitive on a global scale.

Non-oil sector as the main contributor 

So, according to the concept, which in principle can be regarded as a declaration and a global plan for the country's development in all spheres of life, the main task facing the country in the coming years is not to fall behind in development. This, above all, requires the removal of the existing dependence on hydrocarbon resources, a permanent focus on such an important issue as the prevention of the country's transformation in the medium and long term into a raw materials appendage and technological "outsider" of the global economy. "In the last decade, hydrocarbon exports have been the main driving force of economic growth, but the main task at this stage is to achieve accelerated development of the non-oil sector, increase the efficiency and competitiveness of the economy and ensure its progress on the basis of innovation," developers of the document indicate.

However, the situation in the country's oil sector last year, specifically the decline in oil production, clearly showed that the non-oil sector needs to be developed rapidly and reach the level of maximum substitution. In the period covered by the concept, an average real GDP growth rate for the non-oil sector will exceed 7 per cent.

Therefore, the document is based on an export-oriented economic model. It is expected that competitiveness and improvement of the structure of the economy will contribute to the growth of non-oil exports.

In this regard, of course, attention will again be paid to the development of the country's regions, the implementation of measures to establish modern industrial activities based on local raw materials and the creation of new enterprises. It is assumed that during the period covered by the concept a complex for the production of steel, oil, gas and petrochemical complexes, fertilizer plants, shipbuilding and cement plants will be built in the country. The aluminum industry will be developed, the production of primary aluminum increased, a production chain put in place with the participation of the private sector, including the production of the final product, and the export capacity in this area expanded.

In addition, the focus of the public investment policy for the development of the non-oil processing industry will be the creation of an infrastructure for industrial townships in economic regions. For instance, there are already concrete proposals for the establishment of industrial townships for the processing of petrochemicals in Sumqayit, disposal of household waste in Balaxani, manufacture of metal (aluminum) products in Ganca, etc.

Along with the development of the traditional manufacturing industries of the non-oil sector and the expansion of their export capacity, the creation of new competitive manufacturing industries will be encouraged, stimulus measures taken to increase the export capacity of small and medium-sized enterprises, and the level of state support for businesses with beneficial loans increased.

At the same time, efforts will be mobilized to improve customs and migration procedures and to eliminate factors that hold investors from entering local markets. The reforms conforming to the system of international trade in order to join the World Trade Organization (WTO) and the aligning of national laws with those applied in the global trading practices will ultimately open up new opportunities for the development of local businesses and the economy as a whole. Along with this, the measures to optimize the structure of tax rates and fees for mandatory state social insurance (the part paid by employers and insurers) will create a favorable environment for business.

Improved paying capacity

High hopes are set for an improvement and significant growth in production in agriculture. Its main task is to ensure the country's food security against the backdrop of demographic growth. After all, it is expected that in the period covered by the concept the country's population will grow by an average of 1.1 per cent annually and constitute approximately 10.2 million people in 2020. And this, of course, will affect all aspects of life in the country. It will only be possible to avoid problems by means of a parallel economic development. This envisages not only the minimum task of feeding-dressing-shoeing, but also the provision of quality infrastructure services, affordable housing, development of finance, social spheres - education, health, retirement (to further the ongoing pension reform, a new state program for 2016 -2020 will be prepared), etc. The government is set to gradually increase the minimum wage to the minimum standards of living in Europe - 60 per cent of the average salary.

Besides, the improved well-being will lead to better conditions for a comfortable daily life of citizens. All communications (telephone, internet, banking, utilities, roads, etc.), health and education services will be available even in remote areas and villages. Such indicators as the number of users of computers, telephones, mobile phones, broadband Internet, the ratio of students to the number of computers allocated to them, the rates for telephone and Internet services, etc. will be further improved.

Ultimately, all of these measures will require considerable investment of financial resources. Despite the fairly optimistic forecast for the country's oil and gas sector in the next seven years, which is based on plans for the construction, reconstruction and modernization of production, transportation and processing of oil and gas, access to the global gas market, etc., and the expected profit from the export of energy resources, the focus should be on alternative sources of income. In this connection there are plans to improve the mechanism for the use of oil and gas revenues and to implement a strategy of gradual replacement of income from the sale of hydrocarbons with income from the investment of these funds.

As a separate important requirement for improving the country paying capacity and putting its economy on export rails, a more flexible exchange rate policy will be pursued and a surplus maintained on international investment positions.

Main clause

Thus, the main goals for coming seven years are obvious. They are described in more detail in an article on macroeconomic forecasts of the country's development for 2013 and the next three years, which has become part of the budget package for this year. And the growth dynamics is obvious there (see table).

We note that the data are based on forecasts of changes in the global economy. It is known that in the post-growth period high-income countries will be developed half as fast as developing countries. As a result, developing countries will become the main engine of global economic growth.

It is important that the government sees the republic as a "driving force" of the global economy. From the point of view of economic development, the status of Azerbaijan will rise from a leader of the region to a highly competitive participant in international economic relations. To this end, given the favorable geographical location and great potential, there are plans to transform the country into a trade center of the region and to bring per capita non-oil exports to $1,000.

During this period, Azerbaijan should rightfully become one of the countries with a "high average income" according to the World Bank's "Total national income per capita" classification and advance among the "countries with high human development" classification of the UN Development Program's classification on human development.

The main clause of the concept states: in 2020 Azerbaijan will become an economically and politically developed and competitive country. Well, a good goal justifies the means, especially if the means are also good...