Can the non-oil sector become a locomotive?

Baku/12.09.20/Turan: Forecasts of the state budget for 2021 published recently by the government, revenues are provided for 24 billion 327 million manats, of which 57.3% or 13 billion 950.0 million manats fall on the oil sector, 42.7% or 10 billion 377.0 million manats for the non-oil sector. At the end of the first quarter of 2020, the bulk of the export structure fell on the products of the oil and gas sector (89.8%). At the same time, oil accounted for 83.74% of all Azerbaijan's exports.

In a word, despite the fact that discussions have been going on for many years, programs, road maps, strategies are being developed, again, the burden of the oil budget, and the dependence on oil revenues does not decrease. In the meantime, it is not clear that the non-oil sector will become the main driving force of the economy in providing budget revenues. Considering that oil production in the country is declining and oil prices fluctuate, then to ensure economic stability, the growth of revenues from the non-oil sector must necessarily accelerate.

According to some experts, the reason it has not yet happened is that the non-oil sector has been largely overlooked for many years. Another reason is the lack of a favorable investment environment. The owner of capital investing in another country does not make these investments, first paying attention to the reliability of ensuring the safety of this capital.

In Azerbaijan, attention to the non-oil sector increased after a sharp decline in oil prices on the world market in 2015-2016, but the transformation of the non-oil sector into the locomotive of the Azerbaijani economy turned out to be a long-term process.

Azerbaijan is a more raw-material country, to return to the country of production it is necessary to develop education, train highly qualified personnel, and normal personnel education requires up to 10 years.

Even 10 years later ...

MP Razi Nurullayev believes that one of the reasons for the underdevelopment of the non-oil sector in Azerbaijan is that only 3-4 years have been engaged in this area: “Within 3-4 years, a number of measures have been taken; programs and strategies are being adopted. In recent years, more and more people who talked about this have not been able to achieve their goals. Some plants, factories were opened, but all this could not play a fundamental role for the development of the non-oil sector.”

In his opinion, the COVID-19 pandemic also affected this area, and enterprises were forced to restrict work so that the virus did not spread widely.

The MP adds that at present the non-oil sector of Azerbaijan is unable to surpass oil revenues: "With such a pace and approach, I do not believe that even in 10 years we will be able to reduce oil dependence." In his opinion, programs related to this area are accepted; something is canceled, restarted, when it does not work out, something new, an experiment is underway. According to the deputy, because of this experiment, no one can say how the non-oil sector will develop.

Are there any subjective reasons?

Economist-expert Natig Jafarli says that there are objective and subjective reasons why the non-oil sector cannot develop. N. Jafarli believes that the non-oil sector includes agricultural, tourism, information and communication technologies, etc. Several programs were adopted in the regions.

According to the expert, the objective reason is that the coverage of the country's agricultural sector, its material strength is not as high to ensure domestic consumption and to export: “To replace oil revenues in the agricultural sector, Azerbaijan must export products of the agricultural sector more than 20 times higher than the current indicator. It is impossible. The area of ​​the land, the possibilities of irrigation do not allow for such a rapid development”. Subjective reasons are associated with the continuing monopoly in the country, the lack of the rule of law, the presence of bureaucratic business, and competition problems.

These are the main institutional factors hindering development in the oil sector: “Although the competition code passed its first reading in 2008, it has not been adopted for 12 years. That this code could create a basis laws related to bureaucratic business and the competitive environment.” There is a problem with the courts, without a fair judicial system it is impossible to create a competitive environment in the economy. It also creates an obstacle to investment in the economy. -0—