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LIFE SEEMS GETTING BACK TO NORMAL

Azerbaijan’s foreign trade indicators show purchasing power of partner states rising

Author:

15.06.2010

The global economic recession has led to a decline in the volume of trade transactions between countries. Despite Azerbaijan's favorable geographical location at the crossroads of major transport arteries, the presence of its own oil and gas resources, the government's balanced and pragmatic economic policy, the global downturn has had a considerable impact on the level and structure of Azerbaijan foreign trade, though it did not come as a shock. Whereas in 2008 Azerbaijan carried out export-import transactions worth $54.9 bn, in 2009 this indicator dropped more than 2.5 times to $20.8 bn. 

 

Foreign trade gaining pace 

However, in January-April of this year Azerbaijan's foreign trade considerably increased. The trade turnover of residents and non-residents exceeded $8 bn, which is 49.5 per cent more than in the same period of last year. Exports have increased 76.5 per cent to constitute $6,246.5 mln. The imports of goods to Azerbaijan has reduced 5.3 per cent to make up $1,761.3 mln. Import and export transactions were carried out with 118 countries. 

A positive foreign trade balance of $4,85.2 mln has formed, which is 56 per cent of foreign trade, as opposed to 59.1 per cent in the first quarter. However, by 1 May the foreign trade surplus exceeded imports by 2.5 times in the accounting period. 

  In January-April 2010, exports of all key export items have increased except for aluminum, fruit and vegetables. The reduction in aluminum exports is not, however, explained by a decrease in aluminum production. In fact, it has increased and this trend is likely to continue thanks to the loan allocated by the Central Bank. Aluminum is a popular export item, while the reduction is explained by a reducing purchasing power of importers. The reduction in the exports of fruit and vegetables is of seasonal nature. 

Azerbaijan keeps regaining its positions as a producer and exporter of cotton. The share of cotton in exports in 2009, as compared to the previous year, grew by 40.93 per cent in monetary terms, which is explained by a price hike. In 2009, Azerbaijan exported cotton at a price of $993.48 per ton, while in November the price rose to $1,121.1.

Italy commands over a third of Azerbaijan's exports. Thus, Azerbaijan exported goods worth $2,176.6 mln, or 34.85 per cent of total exports. The main export items to this country are oil and oil products, which account for 93.2 per cent of our exports in January-April. Then comes Israel ($553.5 mln) and France ($536.8 mln). In fact, Italy has been the leader in Azerbaijan's foreign trade since 2008. This situation has been observed for almost two years, except for the first three months of 2008, when Turkey led in January and, while the USA had the lead in February and March. In 2009, the trio of Azerbaijan's key trade partners included Italy, USA and Russia, while in 2008 Italy, USA and Israel.

Data show that trade flows in Euro-zone countries significantly increased in 2010 in comparison with early 2009, when they declined in the wake of the financial recession. Exports from EU countries with due regard for seasonal fluctuations started rising in March, which is probably evidence of the impact of the weakening Euro and growth in global demand. Nevertheless, EU imports have also increased due to the increased procurement of energy.

The highest growth in imports in January-April 2010 was observed in consumer goods, timber, grocery and furniture, while the lowest occurred in hardware and equipment, transport vehicles and spare parts. The decline in the imports of transport vehicles is explained by the global recession, while the decrease in the sale of cars by dealerships in Azerbaijan was caused by a decrease in bank loans. Another objective reason for reduced car imports has been a limitation imposed on the imports of vehicles not meeting environmental, esthetic and operational standards. 

In four months of this year, the imports of cars has dropped 34.7 per cent to the same period of last year. The decline has been preconditioned by the fact that the imports of used cars has reduced in half. Private individuals have imported 6,500 used cars in four months of 2010, while a total of 14,900 cars were imported in the same period of last year. 

At the same time, official distributors and dealers have imported 7,669 cars this year, or 3.8 per cent more than in the corresponding period of last year. Therefore, a total of 14,273 cars worth $117.2 mln were imported in January-April 2010. 

At present, the Azerbaijani government is considering introducing a ban on the imports of cars not meeting Euro-2 and Euro-3 standards. According to the head of the State Customs Committee, Aydin Aliyev, whereas earlier the committee suggested introducing limitations on the import of more than five-year-old cars produced in CIS and seven-year-old cars made elsewhere, now these terms are also likely to be revised. According to him, the imports of cars in 2009 dropped to 60,000 from almost 90,000 cars in 2008.

In January-April 2010, the structure of imports looks as follows: Russia is still in the lead ($312.5 mln), Turkey is second ($192.5 mln), while China is third ($188.2 mln). Then comes Ukraine with $160 mln.

In the future, this list may change considering the predictions on China's foreign trade development strategy in the post-crisis period. It has set forth the task of furthering sustainable and stable foreign trade development, doubling the volume of trade in goods and services and continuing efforts towards ensuring a balanced developed of imports and exports. According to forecasts, by 2020 China is to strengthen its positions as a major trade country, while by 2030 the country is to turn into a trade superpower. To meet these goals, China intends to continuously regulate its trade policies in terms of duties, forms of trade, imports, services, etc.

 

Export-import transactions simplified

At a conference on first-year results of the state program on socioeconomic development of districts for 2009-2013 held on 12 March, the Azerbaijani president gave instructions to prepare suggestions on facilitating the access of Azerbaijani businessmen to foreign markets, enhancing their export capacities and creating favorable conditions for them abroad. 

In May, the government introduced major amendments to the procedure on regulating foreign trade. On 14 May, the president signed a decree "On further measures towards improving the regulations on export and import transactions".

The regulations on export and import transactions were originally approved in 1997, and some of their provision were no longer in line with the present level of economic development. 

The new decree simplified regulations in two directions. The first envisages a reduction in the number of documents and procedures required for a foreign trade transaction. The requirement on the registration and expertise of agreements during the export or import of certain specific goods, services and intellectual property has also been eliminated.

The second direction will simplify payment procedures during export. For example, with the exception of state enterprises and those with the state share of at least 50 per cent, advance payment or irrevocable L/C will no longer be required. 

Novelties are also expected in the area of tariffs. The state customs committee has prepared suggestions on switching from the existing tariffs (0; 0.5; 1; 3; 5; 10 and 15 per cent) of foreign economic activity to a low-step system (0; 5 and 15 per cent).

Also, a new procedure has been introduced for the registration of participants in foreign economic activity. It will enable businessmen to receive a code on the web-site of the customs committee. This is the first step in the e-customs system - Electronic Declaration. The introduction of the Electronic Declaration for participants in foreign economic activity will enable them to declare goods through the Internet, without visiting the customs body.

The government believes that the expanding geography of economic and trade relations, increasing import and export transactions and Azerbaijan's integration into the global economy necessitate a continuous improvement of customs laws and regulatory acts in accordance with the practices of developed countries and provisions of international conventions. This is also necessary in the circumstances of the global financial and economic downturn. 


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