Gubad Ibadoglu: Azerbaijan has no real economy

Today, the Center for Economic Research based by PhD Gubad Ibadoglu marks its tenth anniversary. The main part of the NGO development is related to the sustainable development of the economy of Azerbaijan in the long run. Scientists believe that the government should take responsibility for the fate of future generations.

"The Azerbaijani leadership will not be able to convince the population stability and prosperity of the country at the end of the "oil period." This is caused by the lack of accountability, transparency and public scrutiny when investing budget, as well as receiving and distribution of state-owned oil and gas revenues," he said in a conversation with a correspondent of Turan.

According to him, particularly bad is deliberate spending more than two-thirds of revenue to the State Oil Fund (SOFAR) allocated budget. The IMF last year (http://www.oilfund.az/az_AZ/hesabat-arxivi/rublukh/2013_1/2013_1_4) said that its revenues amounted to 13 billion 600.5 million at a cost of 12 billion 302 7 million manat, of which 11 billion 350 million (92.3%!) was directed to transfer for the implementation of investment projects. For all time the fund received $ 83 billion 859 million (approximately 66 billion manat), more than half of which was used to finance various spheres. Of these, the largest share - 40 billion 619.7 million manat – was transferred to the state budget.

Eating funds intended for future generations leads the country to an abyss in the long term. Hope for the discovery of new deposits is not an excuse for such actions, says the renowned expert.

Today, Azerbaijan has no real economy and more than 50% of non-oil sector in total GDP is "merit" of capital investment in infrastructure and transportation industries belonging to unknown companies registered in offshore zones. In comparison with 2005 (the beginning of the large flow of petrodollars) the share of investment projects in the state budget expenditures in 2013 increased 43.2 times. For comparison - the growth of public investments in education during this period was 3.9 times, in health - 5.4, and in science - by 4.3 times.

Cyclical policy of the government, depending on the price of world oil markets, is flawed for the economy and for the society. It is associated with external debt. Thus, as of January 1 of this year Azerbaijan's public external debt amounted to 5 billion 753.2 million (8.2% of GDP), and this figure is growing. According to the Ministry of Finance, the public external debt per capita by the end of last year was $ 639.

Gubad Ibadoglu believes that external borrowings are good when focused on the stability of the economy. Same joint government projects with international donors (IMF, World Bank, EBRD, Islamic Development Bank, the Asian Development Bank, the Czech banking consortium, Japan International Cooperation Agency, the German Development Bank, etc.) are "friendship and understanding."

The scientist said that large-scale extractive industries projects have a negative effect on the environment and local communities. They provide a limited number of new jobs for a certain period, while their operators often forget about the promised support of local communities and improving the lives of low-income people. "Upgrades" of the economy, usually accompanied by major investment projects are often illusory, and their negative factors cause disproportionate harm to less protected social groups. On "the oil front" most workers are men with special education and skills, and other groups are disconnected from the project of "public welfare."

According to the expert, real economy has no alternative, but inflation generated by corruption and monopolies in all areas of import eats meager savings of the general population. The government claims the need to diversify the economy, but its promises and obvious results of operations do not match. Diversification, above all, involves the creation of competitive environment at all levels of business - from the preparatory period and the creation of the resource base to the sale of products to the final consumer. In addition, the backbone of the economy should be the interests of the massive business and not bureaucrats - the oligarchs. In fact, everything turns against the end user.

In normal countries, governments invest oil revenues in human capital and innovation, while the Azeri students studying abroad try to stay abroad in any way, resulting in the fact that the state oil company’s money is wasted. In the world centers of science, automotive, aircraft, space exploration works there are many experts - Azerbaijanis, who could work here at normal conditions. This factor would allow the state not only to be proud of tolerance and ancient cultural background, but really to develop within a few decades.

According to the scientist, the majority of oil money is spent on the development of Baku and its suburbs, while local specialists settle in the capital to the detriment of regional development that promotes targeted exodus from the countryside.

The country has the prerequisites to be not only a raw materials appendage (including tax payments and customs expenses subjects oil budget revenues by 75-80% of the country formed by hydrocarbons). Past experience shows that we can not only produce oil equipment, use of global demand, but also household appliances, furniture, clothing, shoes, food and a wide range of other attributes of the real economy, summed Ibadoglu. - 17D-