Development of Azerbaijani Economy After the Collapse of USSR, Research Paper Example

Azerbaijan is the name of a geographical area. The name of the area is associated with the inhabitants who have resided in the geographical area for millennia. The Azerbaijani were worshippers of fire.  The name of the country is composed of two parts.  The firstpart in the Turkiclanguage has the meaning of benevolent intentions and the destiny to succeed. Consequently the meaning of Azerbaijan is infers bravery.  This could be interpreted as brave men of brave inhabitants. The name Azerbaijan was originated with an ancient and historic tribe. Azerbaijan is one of the oldest sites in history. There have been human settlementsin Azerbaijan since the beginning of humanity.  In order to comprehend the Azerbaijani people, they must be perceived with a perspective of friendship. The thesis statement that will be explored in this research paper is the development of the Azerbaijani economy (Azerbaijan, 2010; CIA,2013; Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Literature Review

The post independent years of Azerbaijan can be viewed as two distinct period. The years of 1991 to 1995 were a period of economic turmoil and regression. The era that initiated subsequent to 1996 can be perceived as an era of macroeconomic progress and economic stability. One of the primary endeavours that wereperformedby the leaders of Azerbaijan was to delegate effective application of the nation’s realizations from the oil and gas industries. In addition, in order to direct the revenues that were derived from the oil exports to the sections of the economy that required priority attention, the State Oil fund was initiated (Azerbaijan, 2010; CIA, 2013; Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Presently, the international development organizations assertively evaluate the activity that is derived and the transparency with which the State oil Fund is operated. At the initial part of Azerbaijan’s independence from the USSR, the primary problem was to increase its oil exports.  Consequentlyas Azerbaijan did not have the infrastructure in order to optimize on the oil and gas reserves that were available, anagreement was made.  The oil exports were transported by the use of the Baku- Novorossiysk petroleum pipeline. There was a new pipeline that is designated as the Baku- Supsa oil line. In addition, agreements had been made on the building of the Baku- Tbilisi- Ceyhan pipeline. This is presently the primary pipeline that is being used for oil exports from Azerbaijan. The optimization of the oil and gas resources performed an active participation in producing development for the various sectors of the Azerbaijani economy (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

The economic policies that have been pursued have enabled the Azerbaijani economy toexperience sustainable growth and stability in the economic segments of Azerbaijan. Consequently with the production of the oil and gas resources of Azerbaijan, there were new initiatives that were placed into effect in order to increase the economic well being of the population.  The production of entrepreneurship and the attraction of foreign investmentcapital by securing an assertive economic climate for business were particular characteristics of the implementation of the macroeconomic policy in Azerbaijan (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

As an outcome of being able to achieve the expedient initiatives, the section on entrepreneurship was created and the participation of the private sectors s with regards to the socioeconomic responsibilities of the nation increased substantially. Azerbaijan has become a member of all of the international economic institutions. The nation of Azerbaijan was admitted to the IMF, Islam Development Bank and the ERBD.  Seven years afterwards, Azerbaijan was admitted as a member of the Asian development bank.  The main orientations and approaches of the policies that were directed at socio- economic reforms have been able to continue and have been endorsedby the President of Azerbaijan Republic Ilham Aliyev (Azerbaijan, 2010; CIA,2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Azerbaijan is on its way into creating a social and diversified economic system. The goal is to develop an economy that has the capacity for self – development and to be able to successfully integrate into the global economy.  As an outcome of the successful policy implementations, the economic successes have been reinforced and the national economic stability has been produced. In addition, the Azerbaijani economy has been able to demonstrate diversification. The production of the non petroleum and gas resources of the nation has been accelerated. The national currency of Azerbaijan, the manat has been fortified (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Theseimplementations have enabled confidence in the financialsectors.  These implementations of the government interventions have also enabled the government of Azerbaijan to strengthen the private sector and commerce. These implementations by Azerbaijan’s President, Ilham Aliyev have had the outcome of enhanced national sustainability. In order to apply the sustainable and comprehensive initiatives of diversifying the Azerbaijani economy, there have been a number of State initiatives that have been commenced (Azerbaijan, 2010; CIA, 2013; Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

In order to make the most of the present economic potential or the areas of Azerbaijan in the most effective manner, the enhanced socio- economic situation and to supply a balanced development within the nation, the state operated programs have been successfully implemented. This can be attributed to the attention of President Aliyev with regards to the economic production of the regions of Azerbaijan.There has been development of the areas including a recuperation and amplification of the infrastructures in addition to the creation of noveldevelopmentalenterprises (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

The socio-cultural institutions of Azerbaijan have been reinforced during the presidency of President Aliyev. The new phase of development has the objective of increasing the potential for the Azerbaijani economy to gain a competitive advantage. This can be achieved the attainment of a sustained period of dynamic socio economic development. Socioeconomic development is the special concern of the Azerbaijani administration. The non- petroleumsectorsof the economy must receive reinforcement. This is conducted with the goal of creating an economy that can operate independent of oil.  In addition a number of employment positions have been created in order to provide for the socio economic well being of the Azerbaijanis (Azerbaijan, 2010; CIA, 2013; Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Notwithstanding the fact that a recession has taken place in the industrialized nations, Azerbaijan was able to conserve its macroeconomic stability and reduce the poverty in the nation.  Simultaneously, Azerbaijan was able to take the foremost position with regards to developing oil producing nations.  In 2009, the increase of the GDP was assessed at 9.3%. The increase on a per capita basis was assessed at 7.9%.The comprehensive GDP was formed by the production sectors and the service sector. The participation of these sectors in the national GDP was 64.1% and 28.3% respectively. The increase in these sectors was evaluated at 10% for the production sector and 9.1% for the non- oil producing sectors of the Azerbaijani economy (Azerbaijan, 2010; CIA,2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

The increases that were recorded in the oil and gas segment of the economy were assessed at 14.3%. The non- oil sectors of the economy increased by 2.2%. There was a recorded 12.8% increase in transportation and 9.3% in the communications sector.  Industry in Azerbaijan increased 3.2%. In the years of 2004 – 2008, there was an increase of 280% in foreign commerce. The export sectors of the economy increased by 390%. The importsectors of the economy grew by 170% and the export of non- oil items grew by 240%. The 2009 revenues were assessed to be 700% of the revenues that were realized by the government. In the years 2004 to 2009, there were 32, 886 new business that started in Azerbaijan (Azerbaijan, 2010; CIA, 2013; Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

In addition,  therewas the creation of 840,000 new employment positions that were created as an outcome of the State initiatives. Poverty in Azerbaijan was diminished by 400%.  This infers a decrease of from 44.7% top 11% during the period from 2004 to 2009.The effectiveness of the state implementations is demonstrated by the reactions of the international organization.  In the Global Competitiveness Report, Azerbaijan was rated at number 51.  This is an unexpectedly high rating for Azerbaijan.  In the present economic climate, Standard and Poor’s, which is a rating that is used in order to measure creditworthiness assessed Azerbaijan at a positive rating.  The endeavours that must be applied in the next stage of economic development are to sustain the quality of the economic growth and to maintain economic stability (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

The maintenance of economic growth is one of the priorities. In making a new objective to attain these goals, it is the government’s goal to minimize the nation’s reliance on petroleum. In addition, the agriculture sector of Azerbaijan will require encouragement. The aims are to enhance the commercialenvironment. This will be performed by the establishment of industrialzones and economic areas. In addition the government will provide advice and information to the members of the society who require greater socio- economic stability (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Subsequent to the nation’s sovereignty in the early 1990s, it was a necessity for the nation of Azerbaijan to strengthen its political systems. Azerbaijan has a democratic system of government that is a free market economy.  In 1991, the national independence was encouraged. There have been sacrifices.  The liberalizing of the free market processes derived a period of inflationary activity with regards to prices.  This continued until 1995. The costs of consumeritems escalated 207% in the year following Azerbaijan’sindependence. The inflation rate continued rampantly until 1995 (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

In the second phase of the economic plans the Azerbaijan republic was founded on asubstantial number of extensive documents. These documents demonstrated the programme, strategies and concepts that were to be applied in the strengthening of the Azerbaijani economy.These documents served as the framework for a number of initiatives that were implemented. The strategic orientation of this document provided for Azerbaijan’s long term economic development by means of the following principles. These principles were 1. The provision of continuing economic reforms founded on the tenets of free market relations. 2. The optimalutilization of the present economic and natural resources.  This includes the production of technology for the purposes of increasing the socioeconomic stability of the people of Azerbaijan. 3. The logical integration of the Azerbaijan economy into the global economy. (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008)

The applied model had the result s of qualitativemodifications. These qualitative modifications included the restraining of inflation and the eradication of the financing of the state budget deficiency with the Azerbaijani National Bank. The goal for the state was to decrease the budget deficit to a level of 1.23% of the annual GDP. These goals have been achieved in a relativelyshort period of time. The increases in the GDPO have had an average of 10% increase over the five year period that was measured from 2004 to 2009. This derived that the GDP increased by 280% in the five years from 2004 to 2009. The GDP of Azerbaijan is assessed at $43 billion (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

In the past decade the incremental increase in the financial well being of thepopulation in Azerbaijan has been evident. This has been especially true in the rural areas. The next goals for the Azerbaijan economy are the development of agriculture.  The agriculturalfield is the most effective manner of decreasing the poverty in the ruralareas. Agriculture is one of the largest segments of the Azerbaijan economy.  In the Azerbaijani economy39.1% of the population was employed in the agricultural field.  The quantity of agriculturalproducers in Azerbaijan is estimated at 1,208.7 thousand (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

The majority of these figures are private farms. Furthermore there are 78,648 small farms that address the sale and processing of agriculturalproducts. Theproduction in the agriculturalfield has increased by 1% in the field of agriculture, forestry and hunting. There had been a decrease in the agricultural area that has been applied toward agriculturalproduction. In 2009, there was a 42% increase in agriculture (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Natural Resources

The Republic of Azerbaijan possesses abundant natural resources. These natural resources are non ore minerals and fossil fuels. The mineral resources are molybdenum, cobalt, zinc, tin, chromate and iron.  These ores can be encountered in various deposits. The most substantial aluminium ore deposits can be found in the area of Dashcasan. There are also copper and molybdenum deposits in Dashcasan.  The zinc ores are found in the Great Caucasus BalacanZagatala area. In Nakchivan, there are copper ore deposits.  Cobalt is mined in the AshgaryDashcasan areasin addition to magnetite (Azerbaijan, 2010; CIA,2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

There arefossil fuels that can be found in the South Caspian basin and in the plains. These plains and areas are composed of eight fossil fuel bearing regions.  These areas are in the Lower Kur River, Baku- Archipelago and Absheron. In addition fossil fuels can be found in Shamhy – Gobustan, Ganje and the Kur Gabirry areas. In addition, there are fossil fuels in Jallabad and Ajinhur areas (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Azerbaijan is also rich in industrial production. The industries that are conducted in Azerbaijan are light industry, food production, metallurgy, mechanical engineering, chemistry and energy.  In Azerbaijan, there are the manufacture of oilpipelines, plastics, electronics, telephones, mini calculators and cash registers. There is a tendency to manufacture the goods that are consumed within Azerbaijan without the recourse for importation.  The economic participation of the non state sectors in industrialmanufacturing was increased from 5.5% in 1995 to more than 75% in 2008.  The robust development of the fossil fuel sectors will facilitate the production of the non oil economic sectors.  There is a climate that is beneficial for foreigninvestment (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

International Commerce

The Government of the Republic of Azerbaijan has endeavoured to bring foreign investment into the nation. The areas of foreign investment are the fossil fuels industry. The fossil fuels industry has experienced an intensive growth since 1996. The total international commerce with Azerbaijan was estimated at $54.9 billion. The exports were assessed at $47.7 billion and the imports were assessed at $7.2 billion (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Financial Services Sector

The financial services sector in Azerbaijan is supervised by the law on banking.  The main actors in the Azerbaijan financialsystem are the bank of Azerbaijan and the national bank of the republic. The financialservices sectors are administrated by the conventional concept of being credit organization. The difference is that there is a greater range of services that are provided by credit organizations. The financial services sector in Azerbaijan has two levels. The first level is composed of the CBA and the rest of the banks compose the second level. The CBA10 is detailed as the bank of the national services that is operated with state authority. The central bank of Azerbaijan provides supervision over the financial services sector (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

The external stability of the Azerbaijan currency, the manat, and the sustenance of its valueis one of the highest priorities of the nation. The CBA is the authority that licenses the bankingoperations. The responsibilities of the CBA in the financial services sector are the setting of the minimum capital that is permitted for chartering the banks and the net worth of the bank. The branches of foreign banks are administrated by the CBA. The exchange rate for the manat is equivalent to $USD1.22. The ratio of the manat to the dollar is 1: 1.22 (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008).

Priorities for 2012- 2015

The primary goals are to produce the industrialbase. The industrial base in Azerbaijan is composed of a variety of industries. Preferences are given to technology based and export industrial production. The development of these industries is a priority in Azerbaijan. Azerbaijan is one of the global leaders in commercial reforms that have the objective of facilitatingcommerce. Azerbaijan has actually been able to exceed all expectations. The introduction of effective regulations has motivated the expansion of the formal commercial sector. This is important in order to provide sustainable economic growth. The amendments to the employment codes have facilitated the creation of employment. The regulations have increased the national credit by more than 100%. Protections are afforded to minority shareholders.  There is an all in one area that is applied for the registration of commercial establishments.  This enactment has diminished the amount of time that is required for commercial a start-ups and Azerbaijan has streamlined the system of paying taxes by the presentation of an online tax payment system.  Azerbaijan is one of the global leaders with regard to facilitating commerce (Azerbaijan, 2010; CIA, 2013;  Infoplease, 2014; Ismailzade, 2008; Nichol, 2011, Noble et al. 2008)

Conclusion

The main endeavours of the subsequent stages of development in Azerbaijan will be maintaining the value of the manat and sustaining economic development. These objectivesincludediversifying the national economyandminimizing reliance on the fossil fuel sectors.  In addition, Azerbaijan is creating an innovative economic system that has the goal of increasing exports and agricultural commerce.   Simultaneously, the goals of the Azerbaijani government are to increase the socio- economic well- beingof its residents.

References

Azerbaijan (2010). Azerbaijan. Azerbaijan, AZ.

CIA (2013). Azerbaijan. CIA Facts Book.

Infoplease (2014). Azerbaijan. Pearsons Education.

Ismailzade, F. (2008). Russia’s energy interests in Azerbaijan. London, UK: GMB Publishing.

Nichol, J. (2011). Armenia, Azerbaijan and Georgia: political developments and I  implications. CRS Report for Congress, 7- 5700.

Noble, J. , Kohn, M and Systermans, D. (2008). Georgia, Armenia and Azerbaijan. Lonely Planet.