THE STABILITY ZONE

Despite rather pessimistic expectations, the semi-annual statistics of Azerbaijan's economic development can be considered satisfactory. The complicated situation in the financial and banking sector did not have a significant impact on the real sector of the economy. For example, the non-oil sector has demonstrated a steady growth of 1.7%. At the same time, President Ilham Aliyev noted in his speech at the meeting of the Cabinet of Ministers devoted to the results of socio-economic development in the first half of 2017, the greatest growth was achieved in the non-oil industry (4.4%) "and this is the best possible indicator".

Of course, dependence on the energy factor and the reduction of oil revenues have significantly complicated the task of maintaining economic indicators at stable level. The same crisis in the banking sector, which eventually led to a forced increase in the limit of foreign borrowings from 500 million to 4.5 billion manats, could eventually shake the real sector. However, the acceleration of reforms in all areas allowed to maintain a balance and to achieve improvement in other important sectors of the national economy.

The government was forced to increase the limits within the framework of the International Bank of Azerbaijan (IBA) recovery program, as the state will have to assume its obligations for $2.4 billion, and therefore it is planned to issue Eurobonds.

At the same time, foreign reserves have grown by $3 billion, and today they make up $40.6 billion, which once again proves the relevance of the decision on the devaluation of manat, as the support of the national currency rate would "eaten up" the currency reserves of the state. As soon as the Central Bank ceased to send impressive amounts for these purposes, the situation began to improve, and at the same time, manat has been relatively stable in recent months, especially after switching to a floating exchange rate regime.

Moreover, as noted by President Aliyev, the transfers to the budget from the State Oil Fund decreased, which allowed saving the accumulated currency reserve. Incidentally, the parameters of the state budget for the second half of the year have somewhat widened, judging by recent amendments to the parliament. Thus, the parliament approved the growth of the income and expenditure forecast by 3.1% and 6.2%, respectfully. So, after the adjustment, the forecast for incomes will amount to ₼16.8 bn, or 25.2% of GDP, expenditures – ₼17.9 bn (26.9%), deficit – ₼1.2 bn (1.8% ).

Interestingly, revenues from the profit of the Central Bank of Azerbaijan (₼250 million) are leading in the structure of additional revenues, while additional expenses will be directed to payment of the authorized capital of the Azerbaijan Deposit Insurance Fund (₼546 million), coverage of SOCAR's loss from preferential sale of natural gas to population (₼250 million), increase in public investment (₼191 million), etc.

Concerning the last point, the country's economy received $5 billion in investments, and most of them foreign investments, in the last six months. "The state investment program is being successfully implemented and should be fully implemented. This includes the construction of schools, hospitals, the Baku International Sea Trade Port, infrastructure projects, construction of roads, etc. However, it is necessary to exert more efforts for the growth of domestic private investments or at least not to interfere with this process,” said President Aliyev. He noted that local authorities in regions create problems for investors instead of rendering assistance to them. "In some places we can the activities ongoing, but in some places there is no activity, there is indifference. In some cases, instead of helping investors, they are creating problems. This must be stopped. By the end of this year, in December, the presidential administration and the Ministry of Economy should provide me with a list, information on the area in which the number of private investments is attracted. The work of each of the heads of executive power will be assessed against this list, including this indicator," said Aliyev.

The indignation of the president is quite understandable - while foreign investors willingly invest in the economy of Azerbaijan, and in the non-oil sector, considering the country, as I. Aliyev noted, "the stability zone", local entrepreneurs are passive despite a large number of instruments of support from the state. Accordingly, bureaucratic obstacles still exist, and administrative control over their elimination is the only way to improve the statistics of domestic investment.

By the way, as a proof of the growing interest of foreign business in Azerbaijan, let us cite just a couple of indicators: foreign investments in Azerbaijan's non-oil sector increased by 98.3% to $1.7 billion in 2016 thanks to Switzerland, Russia, Turkey, Great Britain and the Netherlands.

Why did the president point out the regions? Because the government has accelerated the establishment of various industrial zones and clusters in them in recent years. Moreover, the Ministry of Economy and other structures are studying the market trying to identify promising areas of production. Thus, nine plants will be built in the Mingachevir Industrial Park, two enterprises will start operations in Neftchala, and the construction works in the Masalli Industrial Zone will begin soon. The local entrepreneurs sometimes only have to invest in ready projects. The fact that this process is hampered by bureaucracy and bureaucratic self-will is simply criminal in the period when Azerbaijan needs to accelerate the development of non-oil industry and agriculture.

Moreover, there is interest in Azerbaijani products, and it grows every year. Judging by the statistics of foreign trade turnover, for six months of this year, exports increased by 36%, and the growth of non-oil exports was 27%. Moreover, imports decreased by 15%, and the surplus amounted to $1.9 billion. "I think this is the most desirable result for any country," said President Aliyev.

What is also very important, the geography of export of Azerbaijani products expanded. Currently Azerbaijan exports agricultural products and processed goods to several countries of the Persian Gulf. "I raise this issue during all foreign visits and meetings in Baku with foreign colleagues, I put a list before them and tell them that we can export these goods, you already buy these goods, you can buy them from us, and we can purchase the goods exported by you. The countries of Europe, the Persian Gulf, Asia are interested in our goods. They have not been informed until today," said Aliyev, adding that the establishment of Azexport portal is a very serious step in this direction.

The figures for a number of commodity groups look more than impressive: gold exports grew by 64%, power supply by 3 times, textiles by 73%, and stones, gypsum, cement by 30 times! Traditional agricultural products for Azerbaijan were also sold quite successfully: this year the export of tomatoes grew by 55%, potatoes by 63%, onions by 11 times, dairy products by approximately 4 times, processed fruits and vegetables by 54%, untreated skin - by 38%, alcoholic and nonalcoholic beverages - by 16%.

However, there are negative trends in the recession, the most insulting of which is a reduction in the sale of hazelnut by 9%. But this is the most profitable commodity, which already brings revenue of $100 million per year, and there is a potential for its double growth. Currently, the hazelnuts gardens cover an area of ​​more than 30 thousand hectares. "We are challenged to increase the area of ​​hazelnut gardens by an additional 40 thousand hectares. This process is under way, and 18,000 out of 40,000 hectares have already been sown," said the president. According to him, in the future Azerbaijan can also receive an annual revenue of $50 million from the export of olives. Last year Azerbaijan exported 300 tons of this product.

As for one of the most promising items of the agricultural export of Azerbaijan, in 2016 the farmers sowed an area of ​​51 thousand hectares with cotton. This year the coverage increased almost three-fold reaching 136 thousand hectares, which translates to 260-270 thousand tons of cotton. During the first half of the year, the cotton exports and cotton fiber production grew by 154% and 6.5 times, respectively.

The figures are quite optimistic. "This was achieved in the country whose incomes decreased by three to four times in the past two years," said President Aliyev. However, as psychologists advise, in order to achieve success and development, it is necessary to leave the "comfort zone" and struggle with difficulties occasionally. This statement is also true as far as the situation in the Azerbaijani economy is concerned.