POST-OIL PERIOD

Azerbaijan has proclaimed the start of a post-oil period in its economy and transition to a new stage of important reforms. Speaking at a conference devoted to the results of the second year of implementing the state programme for the socio-economic development of the regions in 2014-18, President Ilham Aliyev pointed out that, from now onward, sustainable development factors will be as follows: reforms, transparency, responsibility, developing the non-oil sector, export-oriented production and reducing dependence on import. Furthermore, work along these lines will continue at an increased pace in order to minimize, as much as possible, the negative effects on the population of the fourfold drop in oil prices. 

As the president said, it was earlier reckoned that the post-oil period would start in Azerbaijan within 30-40 years or so and revenues from the South Gas Corridor to be implemented within two or three years would prevent decline in oil production to a certain extent. However, the situation in the global oil market compels us to find new methods of economic development and against rather tight deadlines.

Coming to the foreground is the issue of additional measures to enhance the business and investment environment, ensure the full transparency of the economic and financial sectors, the tax and customs bodies, expanding the tax base, correct record-keeping and statistics. 

In such conditions, it is certainly necessary in the first place to stake on the development of entrepreneurship in the non-oil sector. Only competitive and export-oriented production can really help the country fill the voids caused by the decline in oil revenues and influence prices in the consumer market. Fortunately, quite a lot of enterprises in different commodity groups were set up in the country in previous years. However, the import component is still present in many end product items and it has an impact on their price.

For example, the issue of the absence of facilities for producing required volumes of packaging materials in this country looms large today. "Packaging materials are present in every item of products made in Azerbaijan. This points to the fact that this sphere has not been given proper attention. It is a must to build new factories making cardboard. Our production is 50 per cent dependent on foreign materials. And this must be gradually eliminated," Ilham Aliyev said in his speech. 

It should be noted that, following his instructions, the Ministry of Economic Development announced additional support to this sphere. "We already have enterprises that make packaging products and it is also important to improve their quality. For this purpose, the state will render support and grant loans to such enterprises and their products will be offered to domestic producers," people at the ministry said. 

The presence of the external factor makes itself particularly felt in the production of foodstuffs. Huge funds are being allocated in this country for the development of agriculture. There are big infrastructure and land-improvement projects in progress, and grain elevators and refrigerators under construction. However, the retail prices of many local commodities increased in the wake of devaluation. It turned out that enterprises were forced to raise prices because they had to import fertilizers, fodder and medicines from abroad. So, the main objective for relevant ministries and departments today is to identify "blank spots" in the production chain and involve businessmen in efforts to remove them. In particular, President Ilham Aliyev pointed out prospects for the production of medicines and fodder inside the country. In addition, to encourage the development of individual sub-sectors within the agricultural sector, in particular, cotton growing, it is necessary to increase purchasing prices for raw materials and invest additional funds in efforts to revive the cultivation of Azerbaijan's traditional crops, such as tea and cotton. 

It should be said that businessmen themselves see a way out of the situation in easing some requirements within the tax and customs legislation, in particular, in reducing customs tariffs for import of raw materials, exemption from a number of taxes for early-stage businesses and other measures. In this context, the State Customs Committee has already announced its proposals to increase duties and taxes on the import of a number of commodities already produced in this country. At the same time, First Deputy Chairman of the State Customs Committee Safar Mehtiyev has said that, to expand domestic production, it is necessary to reduce customs duties on the import of some types of raw materials. Aydin Aliyev, the head of the State Customs Committee, touched upon matters related to protecting the domestic market and said that, in the first place, this applies to the agro-industrial complex and the processing industry.

According to him, quotas may be imposed for this purpose on some imports or others; it is also possible that high seasonal duties may be imposed on individual import items.

So, as a result, the country must not only provide itself at least with vital products as much a possible but also eliminate, as far as possible, the external factor in their production. The lower the price and higher the quality of an end product, the more chances it has to withstand competition in foreign markets. By the way, the head of state said that a system of export incentives would be created in Azerbaijan within a very short term. The system envisages privileges for entrepreneurs making competitive products and supplying them to the world market. 

Product publicity at the government level starting from the ministries themselves will provide an additional incentive to develop local production. The president urged the ministries to give up foreign cars and furniture in favour of local ones. "From now onward, there must be local furniture in the offices of all state officials. All inspecting bodies, such as the Accounts Chamber, the Ministry of Finance and other bodies should follow up on this," he emphasized and urged officials to replace their cars with NAZ Lifan model assembled at the Naxcivan motor-works, which are quite competitive in terms of quality and much cheaper than their foreign counterparts. 

As regards the base for the creation of new enterprises needed by the country's economy today, it could well be implemented using old facilities that are still state-owned. Geared towards this goal is the planned large-scale privatization programme which, along with bringing additional revenue to the state budget, is expected to revive the broken businesses and refocus them on the desired areas of production. As has been voiced by Ilham Aliyev, influential foreign consultants will be invited for carrying out privatization, with complete transparency being the main principle of this process.

Finally, it was decided to allocate from the state treasury more than 70m manats for the National Fund for Entrepreneurship Support (NFES), whereas previously, this item of expenditure was not provided for in the budget.

All of this should eventually stimulate the attraction of additional investments and increase economic activity in the country, and most importantly, create new jobs as against the reduction of workforce in a number of enterprises and institutions. Unemployment threatens to become a major damaging factor generated by falling oil prices. Indeed, Azerbaijan has made great progress in improving the level of employment in the country in recent years, which substantially reduced the level of poverty. And to lose these achievements is the least thing to be desired. President Ilham Aliyev said that state-owned companies are to be involved in the elimination of this threat, to which end new job opportunities should be created at such companies to employ people who applied to employment departments. "Let the people who lost their jobs apply to these departments, and I am sure that we will have opportunities to provide them with jobs," he said. "Employers should also create jobs, enlarge their production sites and feel social responsibility in the regions where they operate".

Thus, the president reminded that citizens and respect for their interests remain, as before, a priority in the economic policy of the state. This is why many budgetary items relating to salaries, pensions and benefits are currently growing against the backdrop of a general reduction in the expenditure side of the state budget. Therefore, any reform should be carried out so as not to go beyond these interests and not to violate social sustainability gained over the last decade.