For what purpose and why the Economic Council was established?

The Financial Stability Council of the Republic of Azerbaijan was established on July 15, 2016, by the Decree of the President of the Republic of Azerbaijan[1]. The purpose of issuing this decree was to further strengthen the country's macroeconomic stability and ensure financial stability, to implement a coordinated policy in this area, as well as to achieve effective regulatory and law enforcement practices. The Council was instructed to analyze the current situation in the financial and credit sector in the country, as well as to examine the legal framework, to prepare proposals within 1 month on the review, steps to be taken in the medium-term, and implementation mechanisms on the prevention of future threats based on advanced international principles and standards in the field of financial stability and ensuring macroeconomic stability and financial sustainability, and to submit it to the President. According to the decree[2], the Council may involve local and foreign experts, specialists, international organizations, and scientific institutions in the implementation of these measures, and establish working groups consisting of representatives of various government agencies and stakeholders. The decree also recommended the Central Bank of the Republic of Azerbaijan to establish the Secretariat of the Council in order to organize the current activities of the Council.

The Council included assistants to the president and vice president for economic affairs, as well as heads of government agencies responsible for the economy, banking, credit, finance, and fiscal policy. In fact, while the Executive Director of the State Oil Fund was represented in the Council, the exclusion of those responsible for tax and customs policy raised certain questions. It was expected that the heads of tax and customs authorities, which contribute to the formation of budget sources of revenue, which play a role in ensuring fiscal balance, would also be represented in the Financial Stability Council. However, the Presidential Decree on Expansion of the Functions and Structure of the Ministry of Economy of the Republic of Azerbaijan[3] dated October 23, 2019, abolished the Ministry of Taxes and transferred its powers to the Ministry of Economy, which later eliminated this need.

According to the Regulations of the Financial Stability Council of the Republic of Azerbaijan[4] approved by the Presidential Decree dated July 31, 2017, the Council coordinates the adoption and implementation of decisions on macroeconomic policy, as well as fiscal, monetary, and financial stability in the country for the current and medium term. The fact that the members of the Council with this authority consisted only of government officials and the chairman of the Central Bank gave the impression that the function of the Cabinet of Ministers had been misappropriated. Because, according to the Regulations, the discussion of the results of socio-economic development of the country and the draft budget for next year was the main topic of discussion of the Council, which has convened at least once a quarter. It was as if the Council was like a small Cabinet within the Cabinet of Ministers.

An analysis of the meetings of the Financial Stability Council shows that its activities[5] over the past four years have not been as productive as expected. The Council did not sign decisions that went beyond the traditional course of the current economic policy but rather assisted the work of the Cabinet of Ministers. Unfortunately, I must also note that the activities of the Council were not provided with openness, transparency, and accountability. The Council, which has reported only to the President, has not held any public events or issued a statement during this period, at least once. Although there is a Secretariat of the Council, its website has not yet been created.

The Financial Stability Council, which changed its chairman four times in four years, has been more remembered by the public with this. During this period, the Council's chairmen were three times prime ministers and once the Assistant to the President of the Republic of Azerbaijan[6] on Economic Policy and Industry. Although the Assistant to the President on Agrarian Policy[7] was in the second line, he was later replaced by the Assistant to the President on Economic Policy and Industry[8]. Finally, by Presidential Decree[9] dated September 9, 2020, the Financial Stability Council was abolished and the Economic Council was established to establish a new governance framework for economic policy and economic reform in the Republic of Azerbaijan. The composition of the Economic Council approved by the Presidential Decree differed from the composition of the Financial Stability Council only in the membership of the Minister of Labor and Social Protection of Population. One of the different points that gets attention in the latest decree is the increase in the periodicity of the Council's report to the President from 3 to 6 months. Although it is planned to involve local and foreign experts, specialists, international organizations, and scientific institutions, to establish working groups consisting of representatives of various government agencies and stakeholders in different areas for the Financial Stability Council, although no steps have been taken in this direction over the past four years, the Economic Council has been given the same authority. The current world practice in this area shows that, in fact, such Councils are not composed only of members of the government. Of course, such councils can be effective only if they serve as a platform for different views and positions. In many countries, the collection of such views and opinions is not through working groups but through direct membership of interest groups. For example, the Financial Stability Committee[10], established in 2011 in Turkey, is an independent body operating under the Ministry of Treasury and Finance. The committee includes the heads of the Treasury Secretariat, the Central Bank, the Banking Regulation and Supervision Agency, the Capital Markets Council, and the Deposit Insurance Fund. The Committee's website[11] provides access to its strategic plans, action plans and reports, as well as assessments and forecasts. In world practice, the Financial Stability Council can be found in the United States, Sweden, Germany, Hungary, and Croatia.

As for the Economic Council, there are two similar councils in the United States. Such that the Council of Economic Advisers[12], established by Congress in 1946, is very active, especially in times of crisis. The Trump administration's keynote speeches and reports during the pandemic are currently being prepared by this council.

The National Economic Council (NEC)[13], established by President Clinton in 1993, was established to advise the President on the US and global economic policy. The council is housed in the Office of Policy Development in the White House and is part of the President's Executive Office. The NEC has four main functions: to coordinate policy development for domestic and international economic issues, to coordinate economic policy recommendations for the President, to ensure that policy decisions and programs are in line with the President's economic goals, and to monitor the implementation of the President's economic policy agenda. The council is usually chaired by the Assistant to the President for Economic Policy.

The Economic Council under the President of the Russian Federation was abolished by the Decree[14] of the President of the Russian Federation, Vladimir Putin, dated July 19, 2018, to facilitate the activities of advisory and consultative bodies under the President of the Russian Federation.

World practice shows that such councils are usually established for the President to assess the economic situation and make forecasts for the future. This work is carried out operatively by the councils. The council is composed not only of officials appointed by the president but also of well-known academics and independent experts.

Although the Financial Stability Council, established four years ago in Azerbaijan, now operates under the name of the Economic Council, in presidential decrees and Regulations approved by him, its goals and activities are stated no different than the tasks of the Cabinet of Ministers. While the Financial Stability Council reported to the President every three months, a six-month period has been set for this purpose for the Economic Council. This means that the purpose of this council is not to prepare operational information for the President. Taking into account that in accordance with the Order of the President of the Republic of Azerbaijan dated March 16, 2016, No. 1897 on Approval of the Main Directions of the Strategic Roadmap for the National Economy and Key Sectors of the Economy and the Issues Arising Therefrom[15], roadmaps have been prepared for 1 main and 11 sectors; then, it is doubtful that this council will also play the role of software for economic reforms. On the other hand, the lack of elements of public accountability and transparency in the activities of the Council allows us to conclude that this is another imitation of reforms.

Gubad Ibadoglu

[1] http://www.e-qanun.az/framework/33301

[2] https://president.az/articles/20613

[3] https://www.taxes.gov.az/az/post/886

[4] http://www.e-qanun.az/framework/36267

[5] https://azertag.az/xeber/Azerbaycan_Respublikasinin_Maliyye_Sabitliyi_Surasinin_iclasi_kechirilib-1224367

[6] https://report.az/maliyye-xeberleri/maliyye-sabitliyi-surasinin-sedri-deyisib/

[7] http://e-qanun.az/framework/41098

[8] http://e-qanun.az/framework/39053

[9] https://president.az/articles/40744

[10] https://en.hmb.gov.tr/about-financial-stability-committee

[11] https://www.hmb.gov.tr/kurumsal-raporlar#

[12] https://www.whitehouse.gov/cea/

[13] https://obamawhitehouse.archives.gov/administration/eop/nec

[14] http://docs.cntd.ru/document/550712554

[15] https://president.az/articles/21953

Gubad Ibadoglu