CARDS ARE ON THE TABLE

Today, most resource-based economies of the world seek to implement a modernization breakthrough, making a bet on the development of non-oil industry with export potential. This is indicated as the main way for Azerbaijan, where legislative and administrative reforms have been implemented and the business environment has been optimized since the end of last year. Another step in this direction was the instructions of President Ilham Aliyev to develop a road map for the development of the national economy until 2020 and to establish a Special Economic Zone.

Despite the great potential for the development of the non-oil sector, 15 years ago the country did not have the necessary financial capacity. There were difficulties with the involvement of foreign and domestic investors in the sector as Azerbaijan was included on the list of countries with a high degree of risk at the time. These circumstances forced us to focus on investment in the extractive and transport industries that ensured stable liquidity and on sales on foreign markets. Subsequently, investment payback and revenues from hydrocarbon exports allowed us to focus on the radical modernization of the domestic non-oil sector.

As a matter of fact, the new industrialization programme de facto started in 2009, when the first industrial parks formed, and in the agricultural sector - large processing and logistical companies.

But today, at the time of a protracted downturn on the global raw materials market, the government should solve the urgent problem - to ensure investments in the real sector of the economy as soon as possible and increase the volume of local non-oil exports several times over. Almost all of the recent decisions by President Ilham Aliyev and the government pursue exactly this goal.

So, in October-December 2015, effective steps were taken to reduce the bureaucratic pressure on business: the number of inspections was reduced to a minimum, the number of licences was cut and the process of receiving them was facilitated. And in January of this year, the introduction of investment promotion certificates started - they are issued to legal entities and individuals, providing them with a number of tax and customs privileges. In early March, a mechanism for the export subsidization of the non-oil sector was introduced in the country, and its validity period will continue until the end of 2020. In particular, people engaged in the export of domestically-made non-oil products will be paid subsidies (3 per cent of the customs value of exported goods) from the state budget. In the near future, it is also planned to launch a mechanism of partial repayment from the state budget for certificates and patents purchased by local companies abroad, accelerate the establishment of logistics centres in promising export markets, carry out marketing studies of external markets and promote the Made in Azerbaijan brand.

The recent decree of President Ilham Aliyev on approving the "Main directions of the strategic road map for the national economy and the main sectors of the economy" is a logical continuation of the series of measures to modernize the economy and support entrepreneurs and investors. The implementation of such a complex problem requires a thorough analysis of the current state of the economy and preparation of a new economic development strategy designed to ensure a long-term vision of the economic reforms implemented by the government. These are the responsibilities of a special working group headed by the assistant to the head of state on economic reforms, Natiq Amirov. In the next six months, the working group shall develop a strategy for economic development in 2016-2020 together with an action plan, draft a long-term vision project for 2025 and designate the goal of economic development in the longer-term. The decree provides for the involvement of local and foreign experts, specialists, consulting companies and research organizations in the development of a long-term strategy for the development of the country's economy.

The road map indicated eight priority areas of the national economy, the development of which will be given the greatest impetus. Among them is the sphere of production - oil and gas and chemical industry, agriculture, production of consumer goods, heavy industry and mechanical engineering. Services industries - specialized tourism, logistics and trade – are a separate block. The new strategy also covers the development of social segments – the construction of affordable housing, as well as vocational education and training of staff for the economy.

For each of these areas it is planned to prepare a separate report, including the analysis and diagnosis of the current status, as well as a "road map". In order to support the development of other sectors of the economy, it is planned to optimize the infrastructure in three areas: financial services, telecommunications and utilities. These three areas will be covered in part, and their support is due to the development projects of priority sectors of the economy. The financial, telecommunications and utility sectors will be improved and their readiness for eventual privatization will be ensured.

It is planned to implement the road map in three stages: the first - a complete diagnosis and SWOT analysis; the second - the vision of the national economy and sectoral road maps; the third - the development of a master plan and its implementation. The administrative structure will be reconstructed to match the master plan, mobilization, syndicated and communication platforms will be formed, etc. While developing key objectives, strategic and sectoral documents will be considered - increasing export competitiveness, expanding foreign direct investment, substituting import and increasing production efficiency on the domestic market.

The most important element in the new industrial strategy is the gradual expansion of diversified industrial parks, a very effective method of concentrating modern industrial enterprises with high export potential.

An additional incentive for entrepreneurs was changes to the Tax and Customs Codes, providing for a number of preferences for the industrial parks.

The key task of the new road map is to attract foreign investors and, more importantly, companies that own know-how in the industrial field and international experience in the organization of export-oriented production.

And Azerbaijan hopes to achieve this goal through the most effective and proven tool in the world - combining the functions of a regional transport hub and a free economic zone. It is noteworthy that seven years ago Azerbaijan adopted the law "On special economic zones". It was assumed that a SEZ would be created near the Yeni Baku port and its residents would be given broad tax and customs preferences. The key point of most of these projects is the formation of an efficient supply chain with a maximum simplified transit procedure for the passage of goods, as well as various benefits for port and rail tariffs.

Moreover, in recent years the country has shown an interest in the experience of the United Arab Emirates in establishing free economic zones, specifically the model of customs control and formation of the logistical chain used in the free trade zone of Dubai. This model could serve as a model for the development of the transit potential of the Alat port in the long-term.

Apparently, such a project will start to be implemented this year. Recently, Azerbaijani President Ilham Aliyev ordered the establishment of a free trade zone in the settlement of Alat in Qaradag district of Baku, which will include the territory of the Baku International Sea Trade Port (BISTP). In the next six months, the Ministry of Economy, in cooperation with JSC BISTP, shall develop proposals for the creation and economic feasibility of the free economic zone and trade area, the concept of its development, design its infrastructure and management system, as well as identify priority types of entrepreneurial activity in the area. The government agencies will hire an international consultant and improve the relevant legislation. During this period, it is also planned to determine the exact boundaries of the FEZ, making a list of owners and users of land, as well as to analyze the economic, social and environmental situation in the zone, indicating the available material and human resources and the potential for providing communications and other infrastructure.

It is hoped that the development of a strategic road map will help attract investment and know-how to our non-oil sector and contribute to the formation of free economic zones, thereby ensuring long-term competitiveness of domestic exports.