THREE STAGES OF ECONOMIC INDEPENDENCE

Azerbaijan has launched celebrations to mark the 20th anniversary of the republic's independence. Despite the short historical period, the country has made a huge leap forward in many respects and, particularly, in the economic sector. This was clearly demonstrated at an exhibition organized by the Chamber of Commerce and Industry - "Independent Azerbaijan in 20 Years" - which was attended by more than 130 companies and reflected achievements in industry, fuel and energy, information technology, agriculture, transport, environment, tourism, construction, health, education and culture, as well as other areas.

From formation to a rapid increase

The statistics for the 20-year economic history of Azerbaijan can be divided into three periods - from 1991 to 1994, from 1994 to 2003 and from 2003 to the present. The fact is that in the first years of independence, the country, faced with aggression from Armenia, also experienced domestic showdowns, anarchy and chaos. In the following nine to ten years, Azerbaijan only tried to overcome the negative impact of the collapse of the Soviet Union and the war and somehow rebuild the collapsed economy, putting it on the rails of market relations. The only plus point, but it was a big one, was the oil and gas sector. And Heydar Aliyev effectively used that plus point to restore the country virtually from the ruins. "The Contract of the Century", signed in 1994, fed the economy in the form of foreign investment. In parallel, the government attracted loans and began to actively cooperate with international financial institutions, which started frightening the country with Dutch disease and predicting poverty once the contracts had expired. However, President Ilham Aliyev noted at the international gala event on the 20th anniversary of the restoration of state independence that "we have left Dutch disease behind". "Poverty reduction from 49 to 9 per cent confirms that the income from the oil and gas resources of Azerbaijan is distributed equally. Today, we have reduced the gap between the rich and the poor. I think that we will totally eliminate poverty," the president said.

These results were achieved during the third stage of economic development, which covers the years 2003-11 and is characterized by a rapid growth in all indicators. Economic Development Minister Sahin Mustafayev noted in his report to the head of state that in those years, the average annual growth in gross domestic product was 14 per cent, including 9 per cent in the non-oil sector. The share of the private sector in GDP reached 81.7 per cent. Investment in the economy increased 2.4-fold, including foreign investment - 1.5-fold and domestic investment - 5.5-fold. By the end of 2010, the country's strategic currency reserves increased more than 14-fold and exceeded $29 billion.

It was noted that the revenue and expenditure of the state budget grew by 24 per cent annually on average, the population's incomes -3.2-fold and the average nominal wages - 2.6-fold. The Human Development Index rose to the level of Europe and Central Asia respectively and therefore, the level of employment increased.

Oil and gas artery

The oil and gas sector is still the main artery that feeds the economic heart of Azerbaijan, and no one is denying this dependence. But most importantly, the revenues obtained in this field have been used efficiently, thus increasing the role of the non-oil sector, and indeed, the energy complex has reached a qualitatively new stage of development. "The oil and gas resources of Azerbaijan will play an increasing role in ensuring Europe's energy security. Azerbaijani oil and gas already meets the energy needs of some countries by 40 per cent. Today we are turning from an oil exporter into a gas exporter. We already have seven pipelines which carry energy in different directions. We intend to extend our pipelines, particularly in the direction of consumers who do not have access to the sea," President Ilham Aliyev said while speaking about the achievements of Azerbaijan's energy sector in 20 years.

As was shown at the SOCAR pavilion, oil production grew 6.1-fold in our country in the period of independence, while gas grew 3.1-fold. Since the beginning of the first phase of the Azari-Ciraq-Gunasli project, 247 million tonnes of oil and 62.7 billion cubic metres of gas were produced. A total of $35.8 billion of foreign investment was made in the oil industry, including $24.4 billion in the Azari-Ciraq-Gunasli project. The rational use of revenues and other achievements allowed the State Oil Company to invest in Turkey, Georgia, Ukraine, Romania, Moldova and other countries.

Along with this, it should be noted that over the years Azerbaijan has sought to achieve full transparency in the spending of petrodollars and, as the head of state notes, now the State Oil Fund of Azerbaijan (SOFAZ) is the most transparent of such institutions. It should be noted that in 2001-2011, the State Oil Fund received $60 billion, some of which was funnelled into accumulation. The fund's executive director, Sahmar Movsumov, said during the round table "State Independence of Azerbaijan: the Industrial and Energy Complex on the Way to New Heights" that if in 2001, SOFAZ assets were $491.5 million, in 10 years they grew 65-fold to 32 billion. "The assets of the State Oil Fund were invested in the implementation of such large-scale projects of regional importance as the construction of the Baku-Tbilisi-Ceyhan oil pipeline, the Baku-Tbilisi-Kars railway, as well as in improving the welfare of refugees and internally displaced persons," he said. All these achievements were reflected in the SOFAZ pavilion at the national exhibition.

Azerbaijan has proved to international institutions that investing oil revenues in infrastructure projects is only for the benefit of the population and is an additional legacy for future generations. Take, for example, the largest water supply project carried out in the country since independence - the construction of the Oguz-Qabala-Baku water pipeline, which was commissioned late last year. Thanks to it, the capital should finally be fully provided with quality drinking water.

As for energy, the stands of the Azerenergy pavilion showed that our republic's electricity system has 13 thermal and seven hydroelectric power plants, the total capacity of which is more than 6,400 megawatts. The energy system of our country includes more than 200 substations of different voltage and generates an annual average of more than 18 billion kilowatt-hours of electricity. Azerbaijan is also becoming an exporter of electricity, which will provide the country with additional revenue in the future.

Along with all this, not reducing, as the IMF sought, but increasing annual salaries, pensions and benefits, the government has secured a high level of welfare for citizens. According to information in the State Social Security Fund pavilion, in the years of independence, the total income and expenditure of the fund is 1.765 billion manats. Currently, 99.4 per cent of pensioners are paid through plastic cards.

Private business

No less appealing were the private sector pavilions at the exhibition. They showed visitors that today Azerbaijan manufactures a sufficient number of products that conform to the highest international standards and requirements. Produce from the agricultural sector and processing industry, machinery and equipment, clothing and footwear, as well as many other consumer goods - most of the "exhibits" - are already successfully exported. This exhibition demonstrated in the best way the level of diversification of Azerbaijan's economy and the whole range of local products. This factor should certainly play a positive role in implementing the president's instructions regarding the placement of large government contracts in the country.

A separate corner at the exhibition was devoted to the success of the Naxcivan Autonomous Republic. Over the 20 years, the autonomous republic established 432 industrial enterprises. The share of the private sector in GDP is 85.9 per cent. Currently, Naxcivan manufactures products of 305 types and 807 varieties and has created about 68,700 new jobs.

In short, the reforms initiated in 1995 cover the entire country and all sectors of the economy - currently, the Azerbaijani economy comprises more than two-thirds of the economy of the entire South Caucasus. These achievements are highly appreciated by international rating agencies and financial institutions. But the main achievement of the past 20 years is the true independence of the country's economy and its unwavering stability, which allows Azerbaijan to act as a self-sufficient and equal participant in the system of international relations.