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Economy of Azerbaijan

Economy ofAzerbaijan
Currency 1 Manat = 100 qəpik
Calendar year
Trade organisations
ECO, GUAM, WTO (observer)
Statistics
GDP Nom.: Increase $77,91 billion (2014)[1]
PPP: Increase $165,3 billion (2014)[1]
Rank: 76th [1]
GDP growth
Increase 4.5% (2014) [1]
GDP per capita
Increase $17,500 (2014) [1]
GDP by sector
agriculture (5.7%), industry (61.2%), services (33.2%) (2014)[1]
Decrease 1.4% (2014)[1]
Population below poverty line
Decrease 6% (2012)[1]
33.7 (2008)
Labour force
6.12 million (2011)[1]
Labour force by occupation
services (49.6%), industry (12.1%), agriculture and forestry (38.3%) (2008)[1]
Unemployment Increase 5.4% (2014)[1]
Main industries
petroleum and natural gas, petroleum products, oilfield equipment; steel, iron ore, cement; chemicals; petrochemicals; textiles; machinery; cotton; foodstuffs
66th[2]
External
Exports Decrease $30,89 billion (2014 est.)[3]
Export goods
oil and gas 90%, machinery, cotton, foodstuffs.
Main export partners
 Italy 25.6%
 Indonesia 11.1%
 Thailand 7.4%
 Germany 6.1%
 France 5.5%
 India 4.4%
 Russia 4.2%
 Israel 4.1% (2013 est.) [4]
Imports Increase $10.68 billion (2014 est.)[5]
Import goods
machinery and equipment, oil products, foodstuffs, metals, chemicals
Main import partners
 Turkey 15.8%,
 Russia 14.1%,
 United Kingdom 11.1%
 Germany 7.8%
 China 6%,
 Ukraine 5.5% (2013 est.)[6]
FDI stock
Increase $11.85 billion (31 December 2012) [7]
$12.91 billion (31 December 2014) [8]
Public finances
Increase (10.7% of GDP) (2014)[1]
Revenues Increase $24.25bn (2014)[1]
Expenses Increase $25.24bn (2014)[1]
Foreign reserves
Increase $17.71 billion (2014)[1]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Azerbaijan has an economy that has completed its post-Soviet transition into a major oil based economy (with the completion of the Baku-Tbilisi-Ceyhan Pipeline), from one where the state played the major role. Azerbaijan's GDP grew 41.7% in the first quarter of 2007, possibly the highest of any nation worldwide.[13] Such rates cannot be sustained, but despite reaching 26.4% in 2005 (second highest GDP growth in the world in 2005 only to Equatorial Guinea), and 2006 over 34.6% (world highest), in 2008 dropped to 10.8%, and dropped further to 9.3% in 2009.[14] The real GDP growth rate for 2011 was expected at 3.7% but had dropped to .1%.[15] Large oil reserves are a major contributor to the economy. The national currency, the Azerbaijani manat, was stable in 2000, depreciating 3.8% against the dollar. The budget deficit equaled 1.3% of GDP in 2000.

Progress on economic reform has generally lagged behind macroeconomic stabilization. The government has undertaken regulatory reforms in some areas, including substantial opening of trade policy, but inefficient public administration in which commercial and regulatory interests are co-mingled limit the impact of these reforms.[16] The government has largely completed privatization of agricultural lands and small and medium-sized enterprises. In August 2000, the government launched a second-stage privatization program, in which many large state enterprises will be privatized. Since 2001, the economic activity in the country is regulated by the Ministry of Economic Development of Azerbaijan Republic.

Contents

  • Economic history 1
    • Modern era 1.1
    • Republic era 1.2
  • Macro-economic trend 2
  • Sectors of the economy 3
    • Agriculture 3.1
    • Manufacturing 3.2
    • Services 3.3
      • Financial and business services 3.3.1
      • Telecommunications 3.3.2
      • Tourism 3.3.3
  • Currency system 4
  • Infrastructure 5
    • Energy 5.1
    • Transportation 5.2
  • Business environment 6
  • Other economic indicators 7
  • See also 8
  • References 9
  • Further reading 10
  • External links 11

Economic history

Modern era

Through the Soviet period, Azerbaijan had always been more developed industrially than Armenia and Georgia, two neighboring Transcaucasia countries - but also less diversified, as a result of slow investment in non-oil sector. With a history of industrial development of more than 100 years, Azerbaijan proved to be a leading nation in Southern Caucasus throughout the turmoil of Soviet Union collapse in early 1990s until nowadays.

Republic era

Oil remains the most prominent product of Azerbaijan's economy with cotton, natural gas and agriculture products contributing to its economic growth over the last five years. More than $60 billion was invested into Azerbaijan's oil by major international oil companies in AIOC consortium operated by BP. Oil production under the first of these PSAs, with the Azerbaijan International Operating Company, began in November 1997 and now is about 500,000 b/d. People visit petroleum spas (or "oil spas") to bathe in the local crude in Naftalan[17] A leading caviar producer and exporter in the past, Azerbaijan's fishing industry today is concentrated on the dwindling stocks of sturgeon and beluga in the Caspian Sea.

Azerbaijan shares all the problems of the former Soviet republics in making the transition from a command to a market economy, but its energy resources brighten its long-term prospects. Azerbaijan has begun making progress on economic reform, and old economic ties and structures are slowly being replaced. An obstacle to economic progress, including stepped up foreign investment, is the continuing conflict with Armenia over the Nagorno-Karabakh region.[18]

In 1992, Azerbaijan became member of the

  • Azerbaijan Economy
  • Azerbaijan Economic Development at DMOZ
  • Hübner, Gerald: "As If Nothing Happened? How Azerbaijan’s Economy Manages to Sail Through Stormy Weather" in the Caucasus Analytical Digest No. 18

External links

  • Habibov, Nazim: "Poverty in Azerbaijan" in the Caucsus Analytical Digest No. 34

Further reading

  1. ^ a b c d e f g h i j k l m n o p q
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  17. ^ Azerbaijani answer to oil glut: Bathe in it - Asia - Pacific - International Herald Tribune
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  28. ^ estimated by the International Monetary Fund
  29. ^ Azerbaijan: Energy profile (Enerpub, 13 December 2007)
  30. ^ a b c
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  35. ^
  36. ^ Azerbaijan’s Ministry of Defense Industry plans to assume several projects on technical modernization of Armed Forces
  37. ^
  38. ^ Azerbaijani Defense Industry Ministry conducts negotiations with Turkish "Otokar" Company on production of armored vehicles
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  41. ^
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  43. ^ CIA.gov, CIA World Factbook Telephones – main lines in use, Azerbaijan 1,397,000 main lines
  44. ^ CIA.gov, CIA World Factbook Internet users, Azerbaijan Internet users: 1,485,000.
  45. ^
  46. ^ Azərbaycan Qarabağın turizm imkanlarını təbliğ edir (Azerbaijani)
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  50. ^ a b
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  60. ^ http://www.cbar.az/ Central Bank of the Azerbaijan Republic, accessed 24 July 2015
  61. ^ http://www.cbar.az/ Central Bank of the Azerbaijan Republic, accessed 24 July 2015

References

See also

  • Calendar year
Fiscal year
  • Azerbaijani manat per US dollar - 1.05 (as of 24 July 2015)[60]
  • Azerbaijani manat per Euro - 1.15 (as of 24 July 2015)[61]
Exchange rates
Currency
  • $3.89 billion (2011 est.)
Debt - external
  • $7,146 billion (2011 est.)
Reserves of foreign exchange and gold
Exports - commodities
  • $11,12 billion (2011 est.)
Current account balance
  • production: 22,55 billion kWh (2008)
  • consumption: 18,8 billion kWh (2008)
  • exports: 812 million kWh (2008)
  • imports: 596 million kWh (2008)
Electricity

-3% (2011 est.)

Industrial production growth rate
Agriculture

1.1% (2012 est.)

Inflation rate (consumer prices)
  • lowest 10%: 3.4%
  • highest 10%: 27.4% (2008)
Household income or consumption by percentage share

17% of GDP (2011 est.)

Investment (gross fixed)
Data from CIA World Factbook[1] unless noted otherwise

Other economic indicators

Azerbaijan led the world as the top reformer in 2007/08, with improvements on seven out of 10 indicators of regulatory reform. Azerbaijan started operating a one-stop shop in January 2008 that halved the time, cost, and number of procedures to start a business. Business registrations increased by 40% in the first 6 months. Azerbaijan also eliminated the minimum loan cutoff of $1,100, more than doubling the number of borrowers covered at the credit registry. Also, taxpayers can now file and pay their taxes online. Azerbaijan’s extensive reforms moved it far up the ranks, from 97 to 33 in the overall ease of doing business.

In 2008, Azerbaijan was cited as the top reformer by the World Bank's Doing Business report:[59]

As of October 2014, Azerbaijan holds the highest foreign investment per capita among the Commonwealth of Independent States (CIS) countries. Germany, for example, has invested approximately $760 million into the Azerbaijani economy, and approximately 177 German companies operate within Azerbaijan. Since gaining its independence, companies have invested $174 billion into Azerbaijan. Foreign investment accounts for around half of that amount.[58]

Business environment

In 2012, the construction of Kars–Tbilisi–Baku railway expected to provide transportation between Asia and Europe through connecting the railways of China and Kazakhstan in the east with Turkey's Marmaray to the European railway system in the west. Broad gauge railways in 2010 stretched for 2,918 km (1,813 mi) and electrified railways numbered 1,278 km (794 mi). By 2010, there were 35 airports and one heliport.[1]

In 2002, the Azerbaijani government established the Ministry of Transport with a broad range of policy and regulatory functions. In the same year, the country became a member of the Vienna Convention on Road Traffic.[57] The highest priority being; upgrading the transport network and transforming transportation services into one of the key comparative advantages of the country, as this would be highly conducive to the development of other sectors of the economy.

Azerbaijan is also an important economic hub in the transportation of raw materials. The Shah Deniz gas field. Shah Deniz is expected to produce up to 296 billion cubic meters of natural gas per year.[56] Azerbaijan also plays a major role in the EU-sponsored Silk Road Project.

The convenient location of Azerbaijan on the crossroad of major international traffic arteries, such as the Silk Road and the South-North corridor, highlights the strategic importance of transportation sector for the country’s economy.[54] The transport sector in the country includes roads, railways, aviation, and maritime transport.

Transportation

Azeriqaz, a sub-company of SOCAR, intends to ensure full gasification of the country by 2021.[53]

Two thirds of Azerbaijan is rich in oil and natural gas.[50] The region of the Lesser Caucasus accounts for most of the country's gold, silver, iron, copper, titanium, chromium, manganese, cobalt, molybdenum, complex ore and antimony.[50] In September 1994, a 30-year contract was signed between the State Oil Company of Azerbaijan Republic (SOCAR) and 13 oil companies, among them Amoco, BP, ExxonMobil, Lukoil and Statoil.[51] As Western oil companies are able to tap deepwater oilfields untouched by the Soviet exploitation, Azerbaijan is considered one of the most important spots in the world for oil exploration and development.[52] Meanwhile, the State Oil Fund of Azerbaijan was established as an extra-budgetary fund to ensure the macroeconomic stability, transparency in the management of oil revenue, and the safeguarding of resources for future generations.

The Baku-Tbilisi-Ceyhan pipeline (green) is one of several pipelines running from Baku.

Energy

Infrastructure

There is a complex relationship between Azerbaijan's balance of trade, inflation, measured by the consumer price index and the value of its currency. Despite allowing the value of the manat to "float", Azerbaijan's central bank has decisive ability to control its value with relationship to other currencies.

The manat is held in a floating exchange-rate system managed primarily against the US dollar. The rate of exchange (Azerbaijani manat per US$1) on 24 July 2015, was AZN 1.05.

The Azerbaijani manat is the currency of Azerbaijani, denominated as the manat, subdivided into 100 qapik. The manat is issued by the Central Bank of Azerbaijan, the monetary authority of Azerbaijan. The ISO 4217 abbreviation is AZN. The Latinised symbol is ().

Currency system

The government of Azerbaijan has set the development of Azerbaijan as an elite tourist destination a top priority.[48] It is a national strategy to make tourism a major, if not the single largest, contributor to the Azerbaijani economy.[49] These activities are regulated by the Ministry of Culture and Tourism of Azerbaijan.

It was not until the 2000s that the tourism industry began to recover, and the country has since experienced a high rate of growth in the number of tourist visits and overnight stays.[46] In the recent years, Azerbaijan has also becoming a popular destination for religious, spa, and health care tourism.[47] During winter, the Shahdag Winter Complex offers skiing.

Tourism is an important part of the economy of Azerbaijan. The country was a well-known tourist spot in the 1980s. However, the fall of the Soviet Union, and the Nagorno-Karabakh War during the 1990s, damaged the tourist industry and the image of Azerbaijan as a tourist destination.[45]

Petroglyphs in Gobustan dating back to 10,000 BC indicating a thriving culture. It is a UNESCO World Heritage Site considered to be of "outstanding universal value"

Tourism

The country has also been making progress in developing its telecoms sector. The Ministry of Communications & Information Technologies (MCIT), as well as being an operator through its role in Aztelekom, is both a policy-maker and regulator. Public pay phones are available for local calls and require the purchase of a token from the telephone exchange or some shops and kiosks. Tokens allow a call of indefinite duration. As of 2009, there were 1,397,000 main telephone lines[43] and 1,485,000 internet users.[44] There are five GSM providers: Azercell, Bakcell, Azerfon (Nar Mobile), Aztrank, Catel mobile network operators and one CDMA.

Azerbaijan has a large and steadily growing Internet sector, mostly uninfluenced by the global financial crisis; rapid growth is forecast for at least five more years.[42]

In the 21st century, a new oil and gas boom helped to improve the situation in the Azerbaijan's science and technology sectors, and the government launched a campaign aimed at modernization and innovation. The government estimates that profits from the information technology and communication industry will grow and become comparable with those from oil production.[41]

Telecommunications

By 1 April 2010, 47 banks, 631 bank branches function in Azerbaijan. One of banks was founded with participation of state capital, 23 of foreign capital. To the same date, 98 non-bank credit organizations operate in the republic along with banks. Growth of real money incomes of population, development of trust in bank system, improving the legal bases of protection of interests of creditors and depositors, in particular launch of ‘Deposits Insurance Fund’ were the criteria characterizing rapid growth of deposits of population. As of 1 April 2010, bank deposits of population were equal to 2,4 billion AZN. 33,3% of them were long-term deposits (higher than a year). As of 1 April 2010, bank credits to customers is 8.5 bn AZN, which makes 70.5% of bank assets. Special weight of private sector in structure of credit investments is higher than 82% (7 bn AZN).[40]

The GDP growth rates observed in Azerbaijan during last years made the country one of the fastest growing economies in the world. But the banking sector of Azerbaijan has yet to tap the vast growth potential that should be achievable due to the continuation of the high economic growth.[39] For this reason the banking sector remains small in relation to the size of the Azerbaijani economy. Since 2002, important stages of restructuring of the banking system have started to be carried out. Taking into consideration entry of big oil revenues in the country, as a logical result of successful oil strategy, and in this base, as the banks were ready to an effective transfer of their financial resources to the strategic goals, development strategy was made for 2002–2005.

Financial and business services

Services

As of late 2000s, the defense industry of Azerbaijan has emerged as an autonomous entity with a growing defense production capability. The ministry is cooperating with the defense sectors of Ukraine, Belarus and Pakistan.[34] Along with other contracts, Azerbaijani defence industries and Turkish companies, Azerbaijan will produce 40mm revolver grenade launchers, 107mm and 122mm MLRS systems, Cobra 4×4 vehicles and joint modernization of BTR vehicles in Baku.[35][36][37][38]

In 2007, mining and hydrocarbon industries accounted for well over 95 per cent of the Azerbaijani economy. Diversification of the economy into manufacturing industries remain a long-term issue.[33]

Marauder (Mine Protected Vehicle) is manufactured in Azerbaijan.

Manufacturing

Some portions of most products that were previously imported from abroad have begun to be produced locally (among them are Coca Cola by Coca Cola Bottlers LTD, beer by Baki-Kastel, parquet by Nehir and oil pipes by EUPEC Pipe Coating Azerbaijan).[32]

Azerbaijan has the largest agricultural basin in the region. About 54,9 percent of Azerbaijan is agricultural lands. At the beginning of 2007 there were 4,755,100 hectares of utilized agricultural area.[30] In the same year the total wood resources counted 136 million m³.[30] Azerbaijan's agricultural scientific research institutes are focused on meadows and pastures, horticulture and subtropical crops, leaf vegetables, viticulture and wine-making, cotton growing and medicinal plants.[31] In some lands it is profitable to grow grain, potatoes, sugar beets, cotton and tobacco. Livestock, dairy products, and wine and spirits are also important farm products. The Caspian fishing industry is concentrated on the dwindling stocks of sturgeon and beluga.

Agriculture

Sectors of the economy

For more than a century the backbone of the Azerbaijani economy has been petroleum, which represented 10 percent of Azerbaijan’s GDP in 2005, and is projected to double to almost 20 percent of GDP in 2007.[29] Now that Western oil companies are able to tap deepwater oilfields untouched by the Soviets because of poor technology, Azerbaijan is considered one of the most important areas in the world for oil exploration and development. Proven oil reserves in the Caspian Basin, which Azerbaijan shares with Russia, Kazakhstan, Iran, and Turkmenistan, are comparable in size to the North Sea, although exploration is still in the early stages.

For purchasing power parity comparisons, the US dollar was exchanged at 1,565.88 Manats only. Currently, the new Manat is in use, with an exchange rate of about 1 manat = $1.10. Mean graduate pay was $5.76 per manhour in 2010.

Year Gross domestic product US dollar exchange Per capita income
(as % of USA)
1995 10,669,000 4,414.14 Manats 1.13
2000 23,590,500 4,473.82 Manats 1.87
2005 79,378,500 4,727.21 Manats 3.74
with figures in millions of Manats. [28]The following is a chart of trend of gross domestic product of Azerbaijan at market prices

Macro-economic trend

In 2015, Turkey and Azerbaijan agreed to boost mutual trade to USD$15 billion by 2023.[27]

In 2012, because of its economic performance after the Soviet breakup, Azerbaijan was predicted to become "Tiger of Caucasus".[23][24][25] In 2012, Globalization and World Cities Research Network study ranked Baku as a Gamma-level global city.[26]

Azerbaijani exports in 2006

In 2010, Azerbaijan entered into the top eight biggest oil suppliers to EU countries with €9.46 billion.[21] In 2011, the amount of foreign investments in Azerbaijan was $20 billion, a 61% increase from 2010. According to Minister of Economic Development of Azerbaijan, Shahin Mustafayev, in 2011, "$15.7 billion was invested in the non-oil sector, while the rest - in the oil sector."[22]

Azerbaijan has concluded 21 production-sharing agreements with various oil companies. An export pipeline that transports Caspian oil to the Mediterranean from Ceyhan, Turkey (the Baku-Tbilisi-Ceyhan Pipeline) became operational in 2006. The pipeline is expected to generate as much as $160 billion in revenues for the country over the next 30 years. The recent high price of oil is highly beneficial to Azerbaijan's economy as the nation is in the midst of an oil boom. Eastern Caspian producers in Kazakhstan also have expressed interest in accessing this pipeline to transport a portion of their production.

Graphical depiction of Azerbaijan Product's product exports (2009).

agreement with Turkey, providing a future export market for Azerbaijan. gas In March 2001, Azerbaijan concluded a [20] had 54 ships.merchant marine In 2002, the Azerbaijani [19]

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