PROMOTING EXPORTS

In the first half of 2018, Azerbaijan's foreign trade turnover grew by 35%. At the same time, exports increased by 34%, including in the non-oil sector (by 20%). The foreign trade surplus reached $4.2b. “This is a very high indicator, which once again shows that macroeconomic stability is ensured completely,” Azerbaijani President Ilham Aliyev said at the meeting of the Cabinet of Ministers on the results of socio-economic development in the first half of 2018 and forthcoming tasks.

He noted that the government would continue to encourage the development of export-oriented production in the non-oil sector. Until now, under the National Fund for Entrepreneurship Support (NFES), soft loans worth ₼2.2b have been allocated for local business projects. Another ₼170m will be allocated on preferential terms this year. Entrepreneurs are also given methodical recommendations and consultations. At the same time, there is not yet enough return from the entrepreneurs themselves. “Today the Azerbaijani state is striving more than entrepreneurs to increase the export of non-oil products. Entrepreneurs are somewhat passive. As if not interested in accessing foreign markets. Therefore, the state assumed all this work,” Ilham Aliyev noted. The state is taking a number of practical steps, including the establishment of export and trade missions under the embassies of Azerbaijan, trade chambers in several countries, assisting export companies in major international exhibitions, a study of foreign markets for the promotion of goods under the Made in Azerbaijan brand.

According to the president, the state intends to open dozens of Azerbaijani trading houses abroad to help promote domestic goods in foreign markets.

Export support by the Azerbaijani government promises the country not only additional foreign exchange earnings, but also the opening of new jobs. Thanks to projects implemented by the NFES, 163 thousand jobs were opened in Azerbaijan.

At the same time, it is not easy to find a niche in the foreign markets for Azerbaijani products, even with such large-scale support from the state. The level of competition in world trade markets is so high that the rules of “fair play” are often violated.

Amidst the unfolding of trade wars between the leading players of the market, many countries not only set high protection rates for imports of certain products, but also try to weaken national currencies to support their exporters.

But for Azerbaijan, devaluation of the national currency is unacceptable because it may entail a new round of inflation, and consequently, the need for the state to strengthen social protection for vulnerable segments of the population. Incidentally, there are no objective prerequisites for the fall of the rate of the national currency.

Meanwhile, the current exchange rate of manat to dollar and euro, as well as incentive measures of the state, allow Azerbaijani exporters to maintain competitive prices in foreign markets.

Decree No. 400 of the Cabinet of Ministers, dated October 6, 2016, provides a mechanism for encouraging individuals and legal entities engaged in the export of non-oil products. According to this decree, the state budget covers 3% of the customs value of exported products for the exporters of a certain range of goods. Taking into account the applied coefficients, the amount of export promotion can reach up to 6%. On June 25, 2018, the range of products to which the incentive mechanism was applied was expanded.

According to the acting president of the Azerbaijan Investment Promotion Foundation (AZPROMO) under the Ministry of Economy, Yusif Abdullayev, only in January-June of 2018 the export of non-oil products reached $29.5m. For comparison, by the end of 2017, the volume of export of this category of goods reached $30 million.

As of the beginning of the current month, ₼5.3m was paid to the exporters of non-oil products. Interest in this investment promotion mechanism is growing, which can be seen from the statistics of recent years. So, if in 2016 encouraging payments to exporters from the state did not exceed ₼250,000, in 2017 this amount increased more than 10 times, reaching ₼2.9m. In the first half of 2018, exporters were paid ₼2.2m. Thus, due to the increase in the export of non-oil products and the increase in the range of goods in 2018, the amount of payments from the state budget for export promotion mechanism will double in comparison with the previous year. In general, the state budget of Azerbaijan for 2018 allocated ₼10m for encouragement of the exporters of non-oil products.

At the meeting of the Club of Exporters of Azerbaijan held on July 2, 2018, entrepreneurs raised the issue of further expanding the range of products subject to export promotion. According to the head of AZPROMO, this includes products whose production has the potential for further increase. In this context, Yusif Abdullayev does not exclude the possibility of further expansion of this nomenclature.

As we can see, the governmental measures solve several tasks at once. First, the support of local exporters accelerates the process of diversification of the national economy.

Secondly, the promotion of exports contributes to the expansion of domestic production, the creation of new processing capacities, increase in areas for vegetables and fruits.

Thirdly, this means opening of new jobs in the regions, which stimulates the outflow of population from Baku to regions.

Most importantly, the mechanism of state encouragement of non-oil exports positively affects macroeconomic stability due to foreign currency earnings, which does not cause a devaluation of the national currency.