FIGHTING FOR THE MARKET

Today, with Azerbaijan is on its way to the World Trade Organization (WTO), many economic experts wonder how competitive Azerbaijani products are. Will we face a situation in the future when our market will be literally inundated with foreign products, which might result in irreparable losses for local manufacturers? Finally, what can Azerbaijan offer foreign consumers, apart from oil and gas, today?

Quality is the most important thing

Before talking about the competitiveness of local manufacturers, we should point out that the overwhelming majority of consumers in the West are quite fastidious, not only about the quality of the products they buy, but also about their packaging, be it an ordinary tooth brush or an expensive laptop. The presence of quality marks is also important. In this regard, we may observe that the long-awaited state service to oversee consumer goods was recently set up in Azerbaijan. Its duty is to oversee the quality of goods and carry out an examination of products exported to the European Union. As can be seen, the problem of the quality of goods is on the government's agenda. Meanwhile, at a recent seminar in Baku, the secretary-general of the International Organization for Standardization (ISO), Alan Bryden, said that today Azerbaijan is marginally involved in the work of this organization. In other words, not all Azerbaijani products have an ISO quality mark. According to the director of the State Agency for Standardization, Metrology and Patents, Ramiz Hasanov, Azerbaijan is a member of only three ISO committees which establish international standards, make changes and so on, although the organization has 150 such committees! "We are observers on another 23 committees. One of them (the information technology committee) is engaged in acquiring modern standards and introducing them in Azerbaijan. The current situation obliges Azerbaijan to join ISO programmes," Hasanov thinks.

The importance of cooperation with the ISO was also noted by the Minister of Industry and Energy of Azerbaijan, Natiq Aliyev: "The manufacturer of a product should understand how important it is to improve its quality and cooperate with the ISO. This is access to the world market."

According to Bryden, if cooperation with the ISO in Azerbaijan depends on the wishes of the manufacturer, it might become compulsory in the near future because the actual export of Azerbaijani products to the world market also requires the compulsory application of international standards.

Talking about the competitiveness of Azerbaijani goods, we have to say that, apart from the fact that they do not have quality marks, there are other problems standing in the way of export. "We have to say that a small country like Azerbaijan cannot be competitive in a great number of products," the chairman of the Fund to Promote Export and Investment (AZPROMO), Emil Macidov, said in an interview with R+. "For this reason, it would be logical to select several of the most promising spheres of the economy which are capable of yielding high quality products and which would be able to compete successfully with foreign goods." AZPROMO has already made a choice which R+'s interviewee said is tactical, not strategic. "This is the export of natural juices and nuts. But still, the state can have its choice and business circles their own. We have to say that our choice is not accidental. In conditions when the system of export support is not yet formed, an entrepreneur should rely either on the raw material base that is already available, or on natural/climatic conditions. If we create a well-established system of export support, insurance and subsidies, we will be able to talk about the export of highly intellectual products, specifically in the sphere of information and communication technology," Macidov said.

Quite recently, AZPROMO announced the opening of a representative office in Aktau, which is there to establish contacts with government and business circles of western Kazakhstan. It cannot be ruled out that in the near future, new Azerbaijani companies will appear in Kazakhstan, some of which will also offer export operations to their Kazakh partners. AZPROMO is working only with Kazakhstan in this way. As for other CIS countries, and other foreign countries, they hold regular business forums. "I have to point out that a very small number of Azerbaijani companies can go the United States with their export products," the chairman of the fund believes. "We should not be making a tragedy out of it - literate planning is needed in this case. More than 100 of the world's 200 countries use export subsidies, since export is a very important element of economic development in any country. In Latin America, businessmen who sell their products abroad get 30 per cent of the proceeds of the overall volume of sales at the end of every year. This money is tax-free. For this reason, it is unlikely that an Azerbaijani wine-grower will be able to compete with an Argentinian one - the latter sells wine at cost, knowing that he will get a lot of money from the state. Our wine-grower is forced to seek access to the market himself. So it is difficult to overestimate state support in the cause of increasing the country's export potential."

At present, the organization is actively dealing with the issue of the specific calculation of the cost of producing competitive goods. In the near future, the results of this analysis will be submitted to the public and government of Azerbaijan.

Emphasis? On traditional spheres!

Doctor of Economics, Rauf Cabiyev, shares Macidov's view: "The development of medium and long-term state programmes to increase the competitiveness of Azerbaijani goods is of fundamental importance today. Emphasis should be placed on support for small and medium-sized businesses, and it is expedient to use combined competitiveness indices to develop them."

In turn, the head of the foreign relations department of the Azerbaijani Marketing Society (AMS), Eldar Qocayev, noted the problem of a lack of awareness of Azerbaijani products in the international community. Today the AMS is engaged in analyzing the potential of Azerbaijani manufacturers, but still, Azerbaijan should place an emphasis on traditional articles of export - black caviar, fish and agricultural produce, specifically vegetables, fruit, nuts, tea leaves, cotton, wool and silk, Qocayev thinks. "In the long-term, milk products can also take a valuable position on the world market," the AMS spokesman thinks.

According to the head of the State Agency for Standardization, Metrology and Patents, Ramiz Hasanov, "Azerbaijan can already place some food products on the world market - these are mainly juices, wines, etc." But at the same time, he stressed that it is necessary to replace all existing standards and technical conditions with international ones.

At the same time, many experts seriously think that even if the quality of most Azerbaijani goods increases to the international level in the future, it is difficult to say that they will be competitive, since other countries will keep improving the technology of production. For this reason, the government of Azerbaijan, trying to expand the export of Azerbaijani products abroad, encourages the development of entrepreneurship and provides equipment for reconstructed enterprises of the non-oil industrial sector on beneficial conditions. At the same time, assistance from international organizations is encouraged. In April this year, the German Technical Cooperation Society (GTZ) started implementing in Azerbaijan the second phase of a project on the development of the private sector. According to project manager Michael Gerlich, it is planned to spend up to 5m euros from various sources on its implementation by 2010. The main purpose of the second phase is to provide consultancy services to Azerbaijani businessmen in various spheres. "Specifically, the consultations will be directed at increasing the quality of products manufactured by businessmen in regions of the country in order to ensure their competitiveness and attractiveness to foreign consumers. Moreover, we will render assistance on issues of the standardization of products," he said.

Today Azerbaijan is also implementing a programme called the "Competitiveness of agricultural enterprises", financed by the US Agency for International Development (USAID). It is aimed at increasing the income of Azerbaijani enterprises by stimulating productiveness and developing the agricultural sphere.

Meanwhile, in the process of implementing a project to audit retail sales in six major cities of Azerbaijan, specialists of the SIAR Consulting company revealed some interesting facts. It turned out that, despite current opinion, the Azerbaijani population consumes not only home-made food, but also canned fruit and vegetables made at factories. Among the most popular products we can find pickled cucumbers, which take 7.9 per cent of the canned food market (in litres) together with juices, tomatoes and canned green peas which take 54.4, 20.1 and 4.7 per cent of the market. They occupy 87.1 per cent of the market and form a group of four leaders. However, if the share of Azerbaijani manufacturers of canned fruit and vegetables (except for juices) accounts for about 60 per cent, the opposite situation can be observed in the juices sector. This indicator accounts for only 29.3 per cent here, which is 0.5 and 2 per cent lower than the sales of Turkish and Ukrainian companies.

The state of affairs with non-alcoholic aerated drinks, tea, oil and milk products is quite different. These markets are equally divided, mainly between local manufacturers. In other words, there is a situation in which Azerbaijani companies working in the food production sector have very good positions on the relevant market and great potential to improve their competitiveness and future development. However, in order to achieve this goal effectively, it is necessary to review the distributional policy and, in some cases, to improve the quality of goods and find new markets where foreign manufacturers are still in the lead.

P.S. The development of the non-oil sector, specifically the sphere of information and communication technology and the agricultural sector, is on the state agenda today. According to government estimates, the comprehensive development of priority sectors in the long-term can give the country the long-awaited export-oriented products. But it is only a long-term plan. Today numerous experts in the agricultural sphere, employees of banks, insurance and transport companies, as well as specialists in the sphere of certification, think that in order to gain a steady position in the country's market and promote goods on the world market, manufacturers should pay more attention, not only to the quality, but also to the packaging of their products. It is also necessary to study international rules of trade, certification, crediting and transportation as accepted throughout the world.