Our non-oil exports and the Singapore model

According to the official figures for the last 5 months of this year (2021), non-oil exports increased by 25.4% compared to the same period last year. The increase in foreign currency amounted to $ 907.6 million. According to the"Export Review" of the Center for Economic Reforms Analysis and Communication [1], as a result of comprehensive measures taken in our country, the negative effects of the coronavirus pandemic on non-oil exports have been reduced and exports have grown dynamically. During this period, sugar exports increased by 2.7 times, cotton fiber by 2.2 times, ferrous metals and their products by 2 times, cotton yarn by 93 percent, aluminum and aluminum products by 84 percent.

While conducting research on this topic, I was interested in the state of non-oil exports in the relevant period of 2020. According to the Center for Economic Reforms Analysis and Communication [2], in January-May 2020, Azerbaijan's exports amounted to $ 6.9 billion, and in the non-oil sector - $ 721 million. Exports in the non-oil sector decreased by 8.9 percent compared to the same period last year.

According to official figures, although non-oil exports in the first 5 months of 2020 decreased by about 9% compared to the same period last year, they increased by 25% compared to the figures of 2021. I would like to give a simple explanation of this increase.

If you pay attention, in countries rich in natural resources, GDP is mainly measured in double digits. However, in developed countries, GDP growth is expressed in small numbers. In Western and European countries, the average GDP growth varies between 2-3%. This means that the smaller the base volume of GDP in an economy, the higher its subsequent growth rate. Thus, spontaneous increases in the acute form are not a sign of development.

Note that in the last 5 months of 2021, the GDP of the US grew by 6.4%. This figure is an unusual level of economic growth for the United States. However, the average GDP growth of the US over the past 30 years has fluctuated between 2-4%. Because in 2020, the global economy, including the US economy, has shrunk so much that in 2021, compared to the previous level (2-3%), the growth rate pushed the GDP axis faster. The same formula can be said for Azerbaijan's non-oil exports. This is due to the methodological aspect of the issue.

If we make a forecast based on real indicators for the last 5 months, by the end of the year, at best, we may have $ 2 billion in non-oil exports. For a country of this size, $ 2 billion in exports means that there is almost no export of the country.

Singapore has a population of 5.7 million with an area of 719 square kilometers. Its area is approximately equal to the area of Goychay district of Azerbaijan. Its annual exports are $ 515 billion. It is more than 25 times the total exports of Azerbaijan and more than 250 times the non-oil exports of Azerbaijan. It is another matter of what kind of products dominate in Azerbaijan's exports. 97% of Azerbaijan's exports are based on natural resources. It was established either on the export of oil and oil products directly or on products derived from their processing. The production of innovative research and technological products is almost non-existent. However, in developed countries, more than 50% of exports are innovative scientific and technological products. For many years now, we have received $ 92 of our $ 100 export only from the sale of oil and oil products.

Nobel laureate Wassily Leontief, a Russian-born US economist, wrote in the Leontief Effect that developed market economies should import raw materials and semi-finished products that require additional labor, and export labor-intensive finished products instead. In fact, the Nobel laureate wanted to say that countries should expand the export of finished products as a priority, and to achieve this, they should fully mobilize export opportunities. For this, the state should use measures to stimulate exports. If the state's oil comfort continues, the worries of the post-oil era will not be able to wake it up. If the conjunctural price of oil in the world changes in your favor for many years, then this dream may be deeper.

Mammed Talibli

Sources:

[1]http://iqtisadiislahat.org/news/azerbaycanin_qeyri_neft_ixraci_25_4_faiz_artib1176?fbclid=IwAR1wIQP2ZFuowd79PBflcLiTKzJkAxBM8zGWBs1GF2W9OT1A2yyrCrQD7-Y

[2]http://iqtisadiislahat.org/store//media/documents/ixrac_icmali/2020/06_Export_Review_2020.pdf