AT THE START OF A JOURNEY

The objective to develop the non-oil sector has become dominant in the new policy being conducted by the Azerbaijani government in the post-oil period of the development of the national economy. Certainly, at a time when oil exports generated the highest revenues, the country's leadership made efforts to develop infrastructure in the regions in order to create favourable conditions for entrepreneurs on the ground. However, the acceleration of this process, along with future-oriented positive trends, actually caused a slight economic stagnation that manifested itself in the fall of GDP in the first quarter of 2016. "That is natural. We were expecting this," said President Ilham Aliyev at a meeting of the Cabinet of Ministers, which was held to discuss the socio-economic development of the country.

However, the president stressed, the situation may still change not least because the non-oil industry in Azerbaijan grew more than 5 per cent in the first quarter of the year. "This shows that the decline in GDP is primarily due to the fall in oil prices and the situation it caused," - Aliyev said.

It should be noted that the Central Bank's "shock therapy" in the form of a double devaluation started to produce positive effects in the first three months: against a background of an almost three-fold decline in global oil prices, the Finance Ministry said that the country's budget was implemented in January-March with a surplus. The revenues of the consolidated budget in the first quarter of 2016 were 4bn and 473.2m manats, spending 3bn and 348.3m manats, and the surplus was 1bn and 124.9m manats.

Effectively, this country has come to learn to live in accordance with the strict laws of saving. Moreover, the situation with revenues coming into the state budget has begun to change. According to Deputy Tax Minister Sahib Alakbarov, there is misperception taking shape in this country and abroad that this country's budget is replenished mainly owing to revenues from the oil sector. In 2015, tax revenues the budget received amounted to 7.118bn manats, of which only 23 per cent came from the oil sector. In the first quarter of this year, as much as 78.5 per cent came from the non-oil sector.

According to tax officials, another positive factor is that 114 foreign companies registered in the first two months of 2016 will, in contrast to previous years, operate in the non-oil sector of this country's economy. On 1 January 2016, there were a total of 269,554 taxpayers.

"Today, the non-oil sector is the core of Azerbaijan's economy. We have achieved this, and we certainly should try to further increase our non-oil exports in the future," President Aliyev said.

He recalled that very important steps were taken within a short period of time to improve the business environment, aiming to provide even greater support to businesses. In the first quarter of 2016, only a total of 34 inspections, excluding tax-related ones, were carried out at business facilities, while 19,300 inspections were carried out in the same period in 2015. "Thus, free entrepreneurship and free competition are rapidly developing in Azerbaijan. We are at the start of this journey for the time being," the president added.

However, the government is already pursuing rather ambitious goals. Everybody knows that this year is to see the implementation of major projects in the field of regional development as well. The implementation of the planned projects will require about 2bn manats, part of which is to come from preferential loans to be issued by the government and another part is to come from businesses. "Thus, the investment to be made in the economy of this country, in the non-oil sector, will contribute to further recovery, creation of new jobs, and we will have new export-oriented output," the president believes.

In the meantime, we must acknowledge that things are not that simple regarding Azerbaijani exports - they are also on the decline, which is primarily due to the decline in global oil prices. However, according to the State Customs Committee, this trend could also be seen in the non-oil sector in two months of this year. However, the same can be said about imports. On the whole, all this is due to the fact that the 100-per-cent devaluation of the manat has resulted in a sharp increase in the cost of imported products. We should also not forget that there is a significant number of imported components in export-oriented Azerbaijani output.

It is necessary to resolve the problem with lending to the national economy, as financial flows are a kind of "blood" that is necessary to make the economy "healthy". However, lending to the real sector is currently something a bit complicated, because almost 80 per cent of people's and businessmen's deposits are in foreign currency.

Incidentally, President Ilham Aliyev pointed to the crucial role private banks play in this process. "Overall, the recovery of the banking sector will specifically service this issue as well. Banks are looking for lending projects that would generate income. Therefore, in this respect the public and private sectors are working in partnership. We pursue the same goal - to develop the country's economy at an even faster pace," the president said.

The main problem facing the Azerbaijani economy is low workforce productivity, primarily in the agricultural sector. In the regions of the country there is still a lot of unused land, which, President Aliyev said, is unacceptable, given that Azerbaijan has not yet provided itself with food 100 per cent.

In addition, it is no secret that business development in the regions is sometimes difficult due to bureaucratic delays and unlawful interferences. Despite repeated warnings issued at the highest level, the problem is yet to be eradicated. However, this time round the head of state warned the heads of local executive authorities that their activities would be determined primarily by the pace of economic development in those regions, "because the main objective now is the economic and social development of each district". "We need to create new jobs, new production areas, export-oriented production areas. Industrial zones will be set up in each district," he added.

In short, since the beginning of the year, the Azerbaijani government has been tackling difficult issues, that had been on the surface, to stabilize the national economy. In other words, the successes achieved at the current stage are only the tip of the iceberg, while the base of the iceberg is a complex tangle of problems that require structural reforms in many areas of the non-oil sector.

Accordingly, there is a thorny path of post-oil development to be walked towards a competitive national economy.