Azerbaijan 2030:The goals and spirit of the document

(Part I)

The Azerbaijani government has submitted a new document in response to the question of what goals Azerbaijan is pursuing in the coming years. It has released a document outlining the goals of reintegrating the liberated territories into the country's overall economy and how to take advantage of the newly created international and regional transport and logistics corridors. The President of the Republic of Azerbaijan signed an Order entitled Azerbaijan 2030: National Priorities for Socio-Economic Development dated 02.02.2021. [1]

Each document has its own short-term and long-term goals. Usually, such documents have both primary and secondary purposes. This document is based mainly on 5 columns. The following 5 National Priorities [2] for the socio-economic development of the country should be implemented in the next decade:

1. Sustainably growing competitive economy;

2. A society based on dynamic, inclusive, and social justice;

3. Competitive human capital and space for modern innovations;

4. Great return to the liberated territories;

5. Clean environment and "green growth" country.

In the first part of the analysis, let us try to systematize our conclusions in two specific directions. Let us try to evaluate them concisely by touching on specific topics related to each goal.

• Sustainably growing competitive economy;

We know from economic theory that one of the 5 most important economic goals of any state is to achieve sustainable development. The government also believes that it is important to lay the foundation for sustainable development by ensuring healthy and balanced economic growth in the long run. It is conceptually correct. Such growth rates can form a solid foundation for sustainable development. For the effective implementation of this priority, two factors [3] must be mutually ensured: (i) sustainable and high economic growth and (ii) resilience to internal and external influences.

As we know, in 2016, the government adopted a major document entitled Strategic Roadmap for the National Economic Prospects of the Republic of Azerbaijan [4]. In the Target Indicator of that document [5], the government envisioned an average annual real GDP growth of more than 3 percent by 2025 and the creation of an additional 450,000 new jobs. However, we saw that while there was a decrease (– 3.1%) in 2016, there was more decrease in 2020 (– 4.3%). In the interim years, the closest point to stagnation was in 2017 (+ 0%) and 2018 (+ 1%). It is unknown how much real average economic growth will be in the next 5 years. However, at the peak of oil revenues during 2004-2015 [6], an average of 10.6 percent economic growth was observed in real terms. If in the years of high oil production and prices, the growth rate has changed by 10 percent, in the post-oil period, this figure will be many times lower. Economic activity targeting an average of 3 percent economic growth can achieve this through strong reforms in the non-oil sector. In this case, it is possible to ensure economic balance. To ensure resilience to internal and external shocks, the government's next goal [7] is to limit transfers from the SOFAZ to the state budget. If we refer again to the Strategic Roadmap, the reduction of transfers from the SOFAZ was also considered to be one of the main goals. This document [8] stated in Strategic Target - 1 as well that it was planned to adopt a "golden rule" that would regulate the transfer of oil revenues to the state budget. Thus, the course of gradually reducing the share of transfers from the State Oil Fund in the state budget had to be chosen. However, such a "rule" has not yet been developed and presented to the public. The fact that this document has not yet been prepared allows us to say that the target of fiscal policy is inconsistent.

One of the most important ways to ensure economic growth is to expose the illegal economy and to increase economic potential. This is especially important than making a natural monopolist or state-owned companies profitable.

• A society based on dynamic, inclusive, and social justice;

As it is known, in today's world, one of the main responsibilities of states is to ensure equal and fair access to economic opportunities, regardless of the social status of the people and the area where they live. In the document Azerbaijan 2030 [9], this priority is based on three goals:

• The benefit of every citizen from development;
• High and fair social security, inclusive society;
• Balanced development of the capital and regions.

There must be a link between the government's goal of achieving economic growth and achieving inclusive development. This document also notes that [10] not only economic growth but also the social welfare of all members of society is an important factor for high development. It is possible that the government will achieve economic growth, increase national income; however, if the disparities in income distribution will increase at the same time, then economic growth will not affect social welfare. Therefore, the economic structures of the government should analyze the components of GDP, not the nominal GDP growth rate. It must control the factors that shape GDP. Along with the increase in national income, it should pay attention to the proportionality in the distribution per capita. It is not necessary to announce the figures to the public by dividing the national income per capita. It must accurately determine the income inequality by making calculations based on the Palm Index (the ratio between the 10% rich and the 40% poor). When income inequality increases disproportionately, it will be appropriate to talk about the growth of poverty in our country, not economic growth.

The government should also take into account that a government that wants to achieve inclusive development must give up extractive economic institutions. The inefficient operation of extractive economic institutions is an institutional barrier that limits citizens' access to social welfare. As economic linear institutions tighten their control over resources through making unpopular decisions and using privileges, citizens' access to social welfare and equal access are limited.

According to the document, the government declares that the required social rehabilitation infrastructure for people with disabilities, including children under 18, should be made available, employment support programs for these people should be expanded, and their social security should be strengthened. In fact, one of the real reforms of this goal, and perhaps the first, should be related to the non-provision of child benefits in the country, contrary to the Convention on the Rights of the Child. This step is the restoration of the so-called "child money" among the people, the letter "a" of the intended target. One of the tasks of the social policy of the state is to take any steps towards teenagers with physical and mental disabilities. On the other hand, in order for children not to be a heavy burden on families, the state must take over a certain part of their social security. According to the constitutional requirements, the creation of social security, such as rights to education, health, security, is also included in the obligations of the state.

Another goal that the government wants to achieve is "balanced development of the capital and regions". According to the document, our main goal, in the long run, is to bring the level of development of the regions in line with the level of development of the capital. But a factor undermining this is that if the Azerbaijani government has not been able to meet the regional imbalance when large oil revenues come in, then it is doubtful how it will be able to do so with the declining resources of the post-oil era.

However, when we analyze the government's reports, we see that all the necessary economic and social infrastructure in the regions has been created. The Ministry of Economy notes in its report [11] that as a result of targeted measures, more than 1.2 million new jobs were created in the country, including 900,000 permanent jobs, and 55,600 new enterprises were created. About 80 percent of new jobs fell to the regions. In general, in 2004-2013, domestic investments increased 14.6 times, investments in the non-oil sector increased 12.9 times, 50.7 billion manats were directed to the regions from all sources.

However, despite all this, the scale and unsatisfactory work done in the regional context suggest that it is impossible to be so optimistic. We can approach this in this way for at least two reasons: (i) If the government has failed to achieve this in a three-phase program under the State Programs for Socio-Economic Development of the Regions (2003-2008, 2009-2013, 2014-2018), then the question arises as to how it will do this in the one-fourth of that time. (ii) If the regional imbalance in the abundance of financial resources has not been eliminated, if the share of regions in budget revenues is only 6%, if regional budgets continue to receive large subsidies from the central budget, and if the urbanization process has accelerated, then there is no choice but to remain pessimistic.

Mohammed Talibli

Sources:

[1] https://president.az/articles/50474

[2] https://president.az/articles/50474

[3] https://president.az/articles/50474

[4] http://iqtisadiislahat.org/store/media/documents/38542.pdf

[5] Strategic Roadmap for the National Economic Prospects of the Republic of Azerbaijan, p. 55

[6] The State Statistical Committee

[7] https://president.az/articles/50474

[8] http://iqtisadiislahat.org/store/media/documents/38542.pdf, p. 59

[9] https://president.az/articles/50474

[10] https://president.az/articles/50474

[11] https://economy.gov.az/article/dovlet-proqrami-2014-2018/22376