HALF WAY

In their efforts to bring the volume and level of development of the non-oil and the oil sectors of the economy closer together the Azerbaijani state and government have for over a year now been carrying out a whole number of key projects, different in size in their geographical, financial and strategic aspects. Take, as an example, the action plans approved at the highest level to develop each of the spheres of the economy, separate documents for each of the country's regions and inter-sectoral programmes. The state programme for the socio-economic development of the regions - all-embracing documents which cover practically all spheres of the country's economic and social life - can justifiably be reckoned to be the locomotive of all these aforementioned programmes.

The first such programme was adopted in 2004 and ended four years later, having justified all the expectations of those who compiled it and carried it through. The results proved to be so successful that a second action plan for the next four years was immediately approved. We have now reached the half-way point and the results obtained enable us to make a realistic analysis of how the programme has been implemented and to make adjustments on certain future plans. This is what the participants in a specially arranged conference, which was also attended by President Ilham Aliyev, discussed the other day.

Progress so far

Arguably, the growth in Azerbaijan's economy of 15% over the past two years could on the whole be described as the main achievement of the abovementioned state programme for the socio-economic development of the regions and the whole of the country's economic policy. And this against a background of the world's financial and economic crisis. The state budget, whose volume for this year exceeds 12 times that of 2004, is also growing at the same impressive rate.

According to Shahin Mustafayev, the Minister for Economic Development, the potential of each economic region has been analysed over the past two years and comparatively priority spheres have been defined. On this basis, passports for the economic regions have been prepared - measures of state support are being implemented taking into account the specific characteristics of each region and utilization of state-of-the-art technology. This also explains the effective results that are expressed in the fairly impressive statistical data. For example, last year alone more than 160 industrial, agricultural, service and trade enterprises were handed over in the regions. Subsidized loans of the National Fund for Entrepreneurial Assistance (NFEA) are being used in 112 of these enterprises. In all, subsidized loans amounting to 115m manats have been allocated over the year to fund 1,430 investment projects, of which it may be said that all are being implemented in the regions.

At the same time, it should be pointed out that subsidized loans have been used to fund projects which, on the one hand, are extremely import for the economic development of the regions, but on the other, for a number of objective-subjective reasons, are not very attractive for commercial creditors. Among these one could name the creation of 14 state-of-the-art poultry complexes, five dairies with a production capacity of 61,000 tons annually and five stockbreeding complexes for 5,150 head of dairy cattle.

Apart from all this, within the framework of state support measures for businesses, in particular small businesses, over the course of the year 1,374 of them were given subsidized loans of 20 million manats, a telephone information centre 195-2 and an electronic commercial website were set up and in order to improve the services of taxpayers an additional 10 tax terminals were built.

In total, as a result of measures carried out within the framework of the state programme, in 2010 about 4,300 new enterprises were set up, providing 73,000 jobs, including 52,700 permanent ones. As a result of the work carried out last year, particularly in the sphere of the socio-economic development of the regions, the poverty level was reduced to 9%. At the end of the day, all this has come about because in the mean annual rate of growth of the human development index in 2000-2010 our country occupied first place in the CIS and moved from the group of countries with "average human development" to "high human development".

Behind the figures that reflect only certain results of two years' work lie great tasks aimed at the development of the country's economy as a whole. After all, every new enterprise, even a small one, is a contribution to the broader participation of the private sector in the economy, which currently makes up over 80% of the Azerbaijani economy.

It is significant that predominantly the growth in this index is being achieved through an increase in small and medium-size businesses which, essentially, is the linchpin of the country's economic stability. And the government, as has already been pointed out, continues to provide the money to feed this sphere - in 2004-2010 subsidized loans of about 700m manats were provided by the National Fund for Entrepreneurial Assistance. But the important thing is that this money was not a "gift" from the state, as many people were suggesting when the fund started. At that time the majority of experts were very sceptical that the fund would prove to be effective, bearing in mind the risk of the loans not being paid back. But today the fallaciousness of these concepts is clear - the increase in NFEA funds is being ensured from year to year to a certain degree because of repaid loans, which has brought the overall level of the loan portfolio to 125m manats. 

At the same time, the state's participation in granting credits to the private sector is also extremely important because, in the funding of projects in which the use of state-of-the-art technology and producing output that complies with world standards are key, this creates a lively competitive environment in the whole production sector. Yes, the state's main tasks today are to fully ensure the country's food security and to reduce its dependence on imports, the negative aspects of which are particularly felt against a background of an oil price increase, but the next step must be to ensure that local production can branch out more broadly to foreign markets.

Future aims

Generally speaking, if we are talking about future tasks, then there is no shortage of them. As Azerbaijan President Ilham Aliyev pointed out in his speech at the conference on the implementation of the state programme for the development of the regions, if this programme is implemented in full measure, then the main economic, infrastructural and social questions facing the country will, to all intents and purposes, be resolved.

However, there is very much more to be done, particularly in developing the agrarian sector which, after oil and gas, has always been a priority area for the country. Because it is this sector which has to fulfil the main task for the next few years, which is to provide food security. A range of measures are now being adopted to develop agriculture: equipment is being purchased and passed on for leasing, agrarian services are being set up, subsidies offered and fertiliser, fuel, and so on are being provided on preferential terms. However, no-one can deny that there are still a number of serious problems in the agrarian sector which require an immediate solution, and that is why it is not so much an integrated approach that is important in tackling these questions as  an inter-sectoral, fine-tuned response towards eliminating these deficiencies.

First and foremost, as the head of state pointed out, questions of opening up new crop acreage, which means creating large grain farms, are vital. "At the present time the appropriate state structures are defining new sectors. I believe that a whole infrastructure needs to be created, above all irrigation, other infrastructural projects, equipment, fertilizer, seeds, and so on. Then we will develop grain-growing, which is the main sphere of our food security, and this will play a very big part in self-sufficiency," said Aliyev.

At the same time, he said, we must also focus a great deal of attention on the development of seed-growing in the country. According to the president's information, the country is able to provide approximately 30% of its seeds. The head of state said this level should be brought up to 100% and this means expanding existing capacities and building new plants.

Another enterprise which could be very useful for the country is a plant for fertilizer production and its construction, according to the head of state's instruction, should be begun this year. These enterprises will play an important role in the development not only of grain cultivation, but also cotton, viticulture and other vegetable growing industries which require greater attention on the part of the government and the private sector.

The main thing here is to stimulate interest among entrepreneurs and to give them the opportunity to market their produce at a profit, to stimulate the desire to develop their business and to produce high-quality output. Azerbaijan has always been well-known for its agricultural produce and virtually all the neighbouring countries have happily purchased and continue to import it, but it is perfectly realistic to expand the geography of our exports. After all, in a world where the "ecologically pure product" label is considered almost a delicacy, the demand for natural products is extremely high. "People arriving from abroad and buying our fruit and vegetables in Baku realize what real fruit and vegetables should be like. This is our great advantage and we can supply ecologically pure products to the world's markets. We simply must have processing enterprises, packaging and a modern approach. This is our great wealth and we must use it rationally," Aliyev said.

If the product is there it is no great problem advertising it bearing in mind the information opportunities that are available in the world today. Incidentally, such questions as creating Azerbaijani trading outlets abroad are already being discussed. "I believe that the finances of the Azerbaijan State Oil Fund should also play a part in this matter. In other words, money could be provided from the Oil Fund and the process of creating Azerbaijani trading outlets and centres of Azerbaijani culture in the leading cities of the developed countries should be started. I believe that we should make a start on this already this year," the president noted. In other words, the propaganda of Azerbaijani products is already beginning at state level.

But this is in the future. Right now the urgent thing is to resolve a number of questions concerning the removal of negative obstacles to the development of business - i.e. corruption and unreasonable checks, monopolism and the arbitrariness of the local executive authorities and town councils, etc. Each of these factors at times turns into a huge problem for any businessman starting out and discourages him from trying to create a progressive business.

"Bribery and corruption are a great evil, a great wound and a great stain for us. We must ensure that there is transparency in all spheres. Here, of course, administrative measures are being and will be taken. Punishments are also being and will be handed out. At the same time, we must conduct structural changes in such a way as to completely eradicate bribery and corruption. The instructions that I have signed recently pursue precisely this objective," the president said, among other things, regarding one of the most painful subjects in the problems listed above.

He pointed to the need to properly utilize land suitable for agriculture, which must be provided by the central and local executive power bodies and town councils, when at times one finds they are directly opposed in this question. It is possible that, after the warning given by the head of state, those persons infringing the law in this sphere will be severely punished and the situation will improve. "Subsidies are being offered in order to boost agricultural production and this procedure must be simplified. We must wage a more earnest struggle against monopolism, and this struggle is not currently being carried out at the proper level," Aliyev also remarked, touching upon another important problem in his speech - artificial price increases for local products. "Some of the figures presented to me show that we are sufficient in some products, but in some cases we are more dependent on imports. For example, 93% of the meat we consume is produced in Azerbaijan, and here one may say the situation is fine. Poultry production has increased and we are currently self-sufficient by 80%. Some 85% of milk and dairy products are produced in Azerbaijan. We are self-sufficient in sugar by 150% and we are even exporting it. So in those spheres where we are not dependent on imports we must categorically not raise prices artificially," the president emphasized.

Meanwhile, among those, so to speak, obvious and clear problems which impede business improvement in Azerbaijan, some questions of an organizational nature, which in countries with a developed economy are considered crucial, are somewhat disregarded. For example, take the question of the lack of competent managers in our country capable of organizing and running an enterprise to world standards. Without good management no project can be implemented fully. Unfortunately, there are also obvious shortcomings in this respect in our education system, which must step up its work in training professionals with practical management skills. In this connection President Aliyev recommended that the process of building vocational technical colleges and bringing them up to modern levels and organizing special courses to train technical specialists and managers should be speeded up. "World experience shows that in the leading transnational companies a person who heads an oil company today can run a telecommunications company tomorrow, and then a major company producing food products. That's how it should be here. Therefore we must focus enormous attention on training professional managers," the head of state said.

Clearly, the range of tasks we have set ourselves is a broad one. Will we be able to achieve all these aims in two years? There are no reasons for a sceptical response to this question today - Azerbaijan possesses sufficient financial resources and human potential to continue its reforms. So it is possible to expect that the next half of the way towards implementing the second state programme for the development of the regions will be carried out with even greater benefit for the country's socio-economic development.