What Do New Structural Changes Serve?

President Ilham Aliyev signed a decree on additional measures to streamline the structure and improve the management of a number of government bodies in the Republic of Azerbaijan. With this decision, several government agencies were abolished, and a few more were merged, the provision of numerous services provided by nearly a dozen government agencies was transferred to the ASAN service, and it was prescribed to prepare proposals for such reforms in law enforcement, military areas and the National Academy of Sciences.

By a decree of January 17, 2019, the State Debt Management Agency of the Ministry of Finance of Azerbaijan was liquidated, and its functions were transferred to the Office of this Ministry. The State Service for the Control of Precious Metals and Gems of the Ministry of Finance has also been annulled. Along with this, the Center for Youth Research at the Ministry of Youth and Sports, and the Department of Accreditation and Nostrification at the Ministry of Education were liquidated.

In addition, a decision was made to merge into one single structure the Institute of Professional Development of Educators, the Institute of Education of Azerbaijan, the Center for Working with Gifted Children and the Republican Scientific and Technical Library, the Republican Center of Physical Culture and the Republican Sports Education Center, the Rehabilitation Center for Minors with Visual Disabilities, the Institution of Rehabilitation and Social Asylum for Homeless, Lonely and Minors in a Socially Dangerous Position, and the Social Asylum for Individuals over 18 Years of Age without a Certain Place of Residence under the State Social Protection Fund under the Ministry of Labor and Social Protection of the Population.

Other presidential decrees provided for the reorganization of the Foundation for the Development of Science under the President of Azerbaijan and the Baku International Center for Multiculturalism based on the principles of self-financing, as well as the Knowledge Fund and the Center for Strategic Studies under the President of Azerbaijan on a voluntary basis.

In accordance with the presidential decree, the State Agency for Alternative and Renewable Energy Sources under the President of Azerbaijan, the Secretariat of the Interdepartmental Commission for the Protection of State Secrets under the President of Azerbaijan, the Permanent Working Group of the State Commission on Combating Drug Addiction and Illicit Drug Trafficking, the State Commission on Prisoners of War, Hostages and Missing Persons and the Secretariat of the Tariff (Price) Council of Azerbaijan will be reorganized on public foundations.

As it can be seen, presidential decrees providing for changes in public administration differ in terms of scope and possibilities to influence the management system. These decrees are not limited to the abolition, unification, reorganization of a number of state structures, but also include the creation of a working group to develop proposals to improve the efficiency of activities and improve the management of the departments (subordinate) of the National Academy of Sciences of Azerbaijan (institutions, centers, educational institutions, etc.) engaged in areas such as science, research, development, advanced training, etc.

In addition, the decrees on additional measures to optimize the structure and improve the management of several state bodies in Azerbaijan, one of the noteworthy points is that in order to more effectively and properly organize the activities of state bodies and structures operating in law enforcement and military , improvements in their management, the implementation of the same or similar powers with the expenditure of a more optimal amount of resources, are entrusted to the Cabinet, within three months to prepare and submit to the President of Azerbaijan proposals on optimizing the amount of data of state bodies and structures, their maintenance costs and the number of employees. In fact, there is a special need for structural changes in this area.

Along with improving the quality of government regulatory mechanisms, especially tax and customs management, also, from a management point of view, expanding opportunities for private entrepreneurship by limiting commercial activities of the public sector (in industry, transport, communications, financial services, etc.) is essential. Therefore, in this direction it is also necessary to carry out structural changes.

With regard to financing of public administration, over the past 6 years there has been a significant increase in the cost of providing general public services. This trend can be observed in the following table, based on budget data:

Table 1. Deductions from the state budget to finance the provision of general public services in 2014-2019

As it can be seen from the data in Table 1, the rapid growth of expenditures on the repayment of the state"s internal and external debts plays a major role in swelling the costs of providing general public services. Thus, in the budget of the current year, the share of expenditures for the provision of general public services in state budget expenditures is forecast at 15.4%, and the share of expenditures on public debt servicing and obligations in this section in budget expenditures is 9.3%. In the budget for 2019, in general, management expenditures are 13% higher than defense expenditures, 70% more than expenditures on education, 48% higher than expenditures on social security and 3.7 times higher than expenditures on health care. The table below shows the structure of management expenses for 2019.

Table 2. Expenses for the provision of general public services in the budget for 2019

As it can be seen from the data of Table 2, this year 60.4% of the cost of providing general public services will be used to finance expenses related to servicing government debt and liabilities. Only 21.2% of these expenditures are aimed at maintaining the legislative, executive and local governments, whose share in total budget expenditures is expected to be 3.3%.

Finally, I would like to emphasize that logically, if the state serves reforms in the public administration system and decision-making mechanism, then structural changes should be carried out before the approval of the Cabinet members, and if it aims to increase the efficiency of state financing and rationalize public spending, then structural changes should be held before the start of the new fiscal year.

The decree of the President of Azerbaijan on additional measures to optimize the structure and improve the management of a number of government bodies in the country was signed on January 17, 2019 - in the new fiscal year and after the presidential election.

Moreover, the budget for 2019 provides funding for government agencies, which were abolished by this decree. True, the Strategic Roadmap on the prospects for the national economy of Azerbaijan notes the need to transition to a new concept of Azerbaijan"s economic development in the context of new institutional and structural challenges in a period of low oil prices, the balance of payments deficit and the non-oil budget, as well as the processes occurring in the financial and banking sector.

However, this was provided for a period of much lower oil prices. The subsequent rise in oil prices removed the need for change in this area. Thus, especially since 2016, the costs of providing general public services have swelled, mainly due to the growth of expenses related to the repayment of domestic and foreign debt of the state and are forecast for this year in the amount of AZN 3,886.8 million or 15.4% of the state budget.

In my opinion, the changes being carried out today under the name of structural reforms can be due to two reasons:

Firstly, the need to reduce budget expenditures against the backdrop of the expected fall in world prices for crude oil, which is Azerbaijan"s main export commodity, and secondly, the need to create a balance between domestic authorities.

In any case, if such changes are not accompanied by improvement of the decision-making mechanism, strengthening of accountability and transparency of governing bodies, and public participation in this process, one should not expect serious benefits from them.

At the same time, the effectiveness of these changes depends on the increase in government wages, the fight against corruption and the renewal of personnel. I would very much like these structural changes not to be of a purely technical nature, but also to be continued by carrying out institutional reforms in the judicial-legal sphere and in the field of ensuring the rule of law.