The government appears to be conscious of the economic progress achieved since 1991, the year in which Azerbaijan declared its independence from USSR. Newly independent Azerbaijan faced a deep post-independence economic crisis, worsened by the conflict for Nagorno-Karabakh, still awaiting a conclusion through the signature of a peace treaty.
Between 2005 and 2011 the GDP of the country grew steadily firstly as a result of the exploitation of the large oil and natural gas reserves (in that period the average annual growth of gross domestic product was 16 percent, with a peak at 35 percent in 2006), ending the transition period from socialist to market economy.
The Republic of Azerbaijan borders in the north with Russia, in the north-west with Georgia, in the west with Armenia, in the south with Iran and Turkey. It faces the Caspian Sea on the east. Azerbaijan is a territory of approximately 8,600 km2 and has a population of 9.2 million citizens, three million of which live in the capital city of Baku.
The regional and internal aspects will be further discussed in a future article. The Development Concept makes a careful analysis of the global factors that influence social, political, and economic life in the country.
As part of the global development trend, the main challenges for Azerbaijan are: economic diversification, elimination of dependency on hydrocarbon exportation, rapid growth of the non-oil sector, and the increase of efficiency and comparative advantage in the production processes through new technologies.
The development of the industrial sector will be possible through the strengthening of the scientific and technological potentials and through the expansion of educational, scholastic, and virtual opportunities for human capital. In addition, the importance of intellectual property rights is highlighted in order to stimulate creativity and innovation as a part of more effectively regulated market.
Globalization and newly emerging economies, like China, Brazil, and India, have encouraged Azerbaijan to promote a more globalized economy. Therefore the country needs to develop economic and commercial relations around the world.
Azerbaijan has faced the economic international crisis well, in primis through rational macroeconomic and monetary policy, the creation of monetary reserves, and the management of the financial risks. The government aims to create and strengthen more flexible financial mechanisms and precautionary measures to protect the national economy against future recession.
Another major challenge is related to the ecological issues derived from the extraction of oil with imperfect methods on the Absheron peninsula and in the Caspian Sea. Also, the issue of drinking water supply needs increased attention. In line with these considerations, it is necessary for the government to develop appropriate preventative and early intervention measures in case of natural disaster. Infrastructure projects must be realized in all regions to guarantee the security of the population.
The Development Concept takes into consideration the existing opportunities and national resources in order to promote a highly competitive economy. According to the classification based on GDP of the World Bank in 2020 Azerbaijan will move into the group of “Countries with a high average income” and will eliminate its dependence on hydrocarbon exportation, the reason why the country is still on the lowest level.
Azerbaijan is likely to become a highly competitive actor in the arena of international economic relations, considering also its favorable geographic position between Europe and Asia. The strengthening of State regulation will ensure fair competition under market conditions and the end of the transition towards an export- oriented economy.
Increasing competitiveness involves different financial sectors including the protection of the macroeconomic stability, the strengthening of monetary and fiscal policies, the development of financial services, and the increase of foreign trade and investment policies. During this period the government plans to keep the inflation at an acceptable level and ensure a gradual transition to a flexible exchange rate.
At the same time, some targeted measures will be taken in order to reinforce the economic structure, namely the modernization of the oil and gas sector and of the petrochemical industry, the diversification and development of the non-oil industry, the implementation of the use of alternative and renewable energy resources, the development of the agricultural sector and the strengthening of food security.
In order to accelerate the diversification of the economy and keep up the pace of development of the non-oil sector, regardless of the level of oil revenues, Azerbaijan fixed that in the period leading up to 2020 the average rate of real GDP growth in the non-oil sector will be higher than seven percent.
Azerbaijan plans to use the economic, social, and politic resources to their full potential, through the expansion of national energetic and logistical infrastructures, transportation, the creation of development regional Centers for the promotion of local services and benefits, even in the smallest cities and villages.
In addition, the realization of a reliable security system through the development of information and communication technology, the full digitalization of the country, and the use of e-government services will be the priorities for State modernization. The goal is to improve welfare policies, in particular for education and public services, security, gender equality, family, youth, sport, preservation of cultural, artistic, and natural heritage.
In the last decade, Azerbaijan has achieved unquestionable results in poverty reduction. The Development Concept aims to increase the middle class and its role in society. Experience demonstrates that States with a large middle class are more politically, economically, and socially sustainable and have higher developmental potentials.
In conclusion, despite its recent independence, Azerbaijan shows maturity in its choice of development priorities, is conscious of its limits and potentials, and is future oriented.