Azerbaijan's economy faces a difficult period - Natig Jafarli

Baku / 12.08.20 / Turan: The crisis phenomena in the economy of Azerbaijan are profound, and the government's measures are insufficient to overcome them. An expert-economist, member of the political committee of the Republican Alternative party Natig Jafarli said in  an interview with the Azerbaijani service of the Voice of America.

Are the changes in the state budget and measures to improve the situation of business and the population adequate to the crisis caused by the COVID-19 pandemic and the fall in oil prices? Jafarli answered this question as follows: “Of course, not enough. The problems are very deep. For some reason, the government thinks it can restart the economy with the push of a button. Overcoming problems will take a long time. We are also seeing a deterioration in the financial situation of the population. "

He pointed out that back in April-May, it was a problem for the government to pay 600,000 people each AZN 190. In June, it was planned to issue these benefits to another 284 thousand citizens. July has already passed, and now it is planned to give benefits to 276 thousand people in August. Helping a business is generally insufficient to recover its losses. Until the end of the year, only 98 million manats are expected to be allocated to support small and medium-sized businesses, which is very little.

The 2021 budget will be approved in November-December. While its parameters are unknown. If there are no serious measures to eliminate the consequences of the crisis, the country's economy will face a difficult period, he said. Jafarli also commented on the statement of President Ilham Aliyev about the inefficiency of state-owned companies, which for many years received large financial assistance from the state or took external borrowings under government guarantees. State-owned companies received large subsidies from the state, their tax and utility debts were written off. At the same time, the infrastructure was formed at the expense of the state.

“If we add up the debts of all state-owned companies, this will be an amount exceeding the sovereign debt of the Azerbaijani state. This is an additional burden for the state, because if state-owned companies cannot repay debts, then the state must do it. It is long overdue to privatize state-owned companies, but due to a conflict of interests this has not yet been done, ”he said.

The main reason for the unprofitableness of state-owned companies is corruption, waste of budgetary allocations, overstatement of expenses. Inflated costs are a barrier to income generation, which is eloquently seen in the example of AZAL. In 2018, according to official data, the airline's losses amounted to 208 million manats. And this despite the fact that it is a monopolist that does not allow competitors to enter the market. It is no coincidence that before the pandemic, the citizens of Azerbaijan preferred to fly abroad through Georgia. Because tickets are cheaper there.

Unprofitableness is the result of serious corruption in state-owned companies. Privatization is inevitable, but it is technically impossible to privatize all state property at once. Most likely, distribution companies will be privatized first. For example, the issue of long-term lease or privatization of gas distribution, water distribution and power distribution may be on the agenda. The tenants or owners can be local or foreign companies.

However, it will be difficult to transfer it to local business, because we do not have official millionaires. And foreign companies demand that Azerbaijan be a member of the World Trade Organization, have a trade agreement with the European Union, and the country has a fair judicial system, Jafarli said.

What companies and enterprises may be of interest to foreign investors? To this, Jafarli replied that “practically all state-owned companies,” including transport companies that carry out rail, sea and air transportation.

SOCAR divisions working in different directions, including subsidiaries, may also be of interest.

“I think the greatest interest will be in distribution companies in the areas of electricity, gas and water supply. We, citizens, also want high-quality service, which state-owned companies do not provide,” the expert noted. Private companies will be forced to sign new contracts with citizens and be held accountable. Thus, it can form normal relations between distribution companies and citizens," Jafarli noted. —16D06-