Outgoing Year Marked by Socialization of Economic Policy

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- Gubad Bay, with what is 2019 remembered in the economic sphere?

-The outgoing year was marked by the socialization of economic policy, a slowdown in growth, monopolization in business, a renewal of management, a retreat back in the Karabakh problem and partial activity in society. From the beginning of the year, the social orientation of state policy continued until the end of the year. The country has increased its minimum wage and pension. After that, wages were raised in a number of sectors. But, unfortunately, 2019 was not remembered for its special significance in solving social problems. This is due to the fact that the cost of solving the problems accumulated over the years has increased, and the funds allocated for this have not been enough. The highest expectations in 2019 were the strengthening of state social assistance, especially for children. However, social assistance to children was provided only partially in the framework of the program of targeted social assistance and at the level of children from disadvantaged groups and families with disabilities. In 2019, two large plants were commissioned. This is the opening of the first phase of the SOCAR urea plant, as well as the high-density polyethylene plant as part of the SOCAR polymer project. For the first time this year, Azerbaijani gas was delivered to Europe. In addition, in 2019, the Ministry of Economics, the Ministry of Taxes, the State Committee for Property Affairs, the State Agency for Antimonopoly Supervision and State Market Supervision were subordinate to the Ministry of Economy. Mikail Jabbarov was relieved of his post as Minister of Taxes, and his appointment as Minister of Economics attracted attention. The change of the Prime Minister, the renewal of the Presidential Administration in 2019 can be seen as memorable and important economically and politically. In 2019, Azerbaijani-Russian relations became even stronger, and the State Oil Company became a shareholder of the Antipin plant in Russia. Russia received a lot of investments from Azerbaijan. At the same time, the liquidation of the Financial Market Supervisory Authority and the transfer of authority of this organization to the Central Bank are also recorded as success this year. Although this step is regarded as a step backward, in my opinion, this is a wrong assessment. Finally, the dissolution of parliament in 2019, lower expectations from parliament and the general inefficiency of parliament in any case affected the economy.

- In 2019, benefits and scholarships were increased. At the same time, the minimum wage is doubled. Given all this, can 2019 be called a positive year in terms of welfare?

- Of course, this year the increase in benefits, pensions and the minimum wage can be estimated from the point of view of increasing the welfare of the population. But the problem is that, along with an increase in the money supply in circulation in the first ten months of this year compared to the same period last year by 18.8 percent, price increases and hidden inflation in the consumer market ultimately led to a weakening effect of measures to improving the social well-being of the population. The closure of jobs during the year also did not go unnoticed, and this year was remembered for the closure of more jobs than in previous years, although official statistics on this issue do not reflect reality. According to official statistics, only 7.3 thousand jobs were closed in Azerbaijan in the first ten months of this year, and 164.4 thousand new jobs were created. But, at least, the number of unemployed registered in employment centers of Azerbaijan, as of November 1, increased by 232.4 percent compared to the same period last year. This suggests that 2019 will also be remembered as a year of unemployment growth. Although the number of unemployed registered at employment centers has increased, the number of vacancies offered to job seekers is 4.4% lower than the total number of officially registered unemployed, with 17,800 registered, which suggests that the initiative to open new jobs this year is weak. In 2019, wage growth again failed to improve the position of Azerbaijan in the corresponding rating in comparison with post-Soviet countries. According to the wage index, in January-September, Azerbaijan offered a salary of 320 euros and 355 US dollars, which is better than in Tajikistan and Uzbekistan. However, this figure is 2 times less than in Russia. 1.5 times less than in Belarus, and 1.4 times less than in Kazakhstan. It is also lower than in Ukraine, Moldova, Georgia and Armenia. The most unfortunate fact is that in Azerbaijan the average monthly wage is still 15 euros or 27 dollars less than in Armenia. In any case, these steps are not enough to restore the lost positions of Azerbaijan. In this regard, the untimely implementation of social measures and generally accepted changes led to a decrease in their economic efficiency, and therefore, 2019 could not play a significant role in solving social problems in Azerbaijan. One explanation for this is that steps in this direction have not been taken for years, the cost of implementing social tasks this year is higher, and the number of unemployed has increased compared to previous years.

- The authorities say that reforms are underway in Azerbaijan. This year, many personnel reforms have been made. In particular, the positions of those employed in the economic sphere have been changed. Officials specializing in the economic sphere have been appointed prime minister and assistant presidents. Several business entities were combined. How has all this affected the economy of Azerbaijan?

-“There is too little time to assess changes in government.” Many of them were implemented at the end of the year. From this point of view, several months can be considered insufficient to assess the effectiveness of their work. In any case, the adoption of new people in the Presidential Administration, the Cabinet of Ministers and other economic institutions can be seen as the first step towards the implementation of new initiatives and ideas. But their implementation still depends on the governance environment in the country. If there are no changes in the management environment and the system as a whole, then you should not wait for new significant changes. The problem is that new people in the economic sphere were not attracted to this arena. In fact, often the changes were in shuffling frames. The impact of these personnel changes on the economy as a whole still depends on the scale and level of reforms in the country. If these reforms are carried out by separate measures, unsystematically and inconsistently, then there is no reason to expect serious consequences from personnel changes. In fact, the reforms had to be carried out in such a way that, as a whole, the cadres would lose their ability to influence changes in the country. That is, the economy must be governed by laws, rules and regulations. Personnel should simply take the lead in this system in order to regulate economic policy at the state level. At the same time, these changes were to bring along with new norms, new relations and behavior of officials. Preliminary observations do not give reason to believe that there have been changes. Relations between governing bodies in the government have not changed. Do not talk about new standards and behaviors. In addition, more fundamental reforms are needed to influence the potential for change and the restructuring of the system as a whole. For example, 2019 could also be the year of the introduction of mandatory income and property declarations. Such a decision, combined with new personnel changes, could ultimately lead to the consolidation of political will against corruption. But in 2019, unfortunately, corruption went beyond Azerbaijan and damaged the country on a global scale. At the same time, the fight against corruption within the country was limited to the fight against crime. Opportunities for transparency and accountability in the fight against corruption have not been sufficiently exploited. This can be argued by the final dictating role of the executive in spending the state budget, which has become a means of using power, the removal of parliament from this process. Poor accountability and transparency, as well as insufficient public participation, ultimately lead to weakened steps taken in the fight against corruption. The inability to create the necessary conditions for the development of an independent civil society and free press in the country, as well as the lack of opportunities for their activities sharply reduced the effectiveness and impact of the work carried out in this direction.

- Azerbaijan is an oil-dependent country. What steps have been taken this year regarding the development of the non-oil sector? And can these steps be considered successful?

- We were not able to achieve the expected economic growth in 2019. According to the results of 11 months of this year, growth in the country was only 2.1%. This gives us reason to say that we are in a better position than Russia in comparison with the CIS countries. Compared with the other 10 countries, the rate of economic growth in Azerbaijan remains low, although the Ministry of Economy has revised its forecasts for growth rates for this and next year. However, the reduction in capital investment in the economy as a whole, the reduction in foreign investment and the wider use of credit investment in consumption ultimately led to the inability of the state budget to play an important role in supporting economic growth. The general slowdown in economic growth may also be associated with a decrease in oil production. But, despite the ongoing decline in production, Azerbaijan cannot survive in the oil-dependent economy. It is not worth talking about the serious consequences of initiatives to develop the non-oil sector, because in the first 10 months of this year, exports excluding oil amounted to 1 billion 570 million dollars, and on average by months - 157 million dollars. This, of course, should be considered a low indicator in comparison with the potential of Azerbaijan. On the other hand, this year it was not possible to achieve a significant investment from the state budget in the non-oil sector. As the implementation of tax reforms declined over the year, fiscal reform failed. There are problems with tax collection. Significant difficulties were observed in tax revenues, especially in the non-oil sector. One of the reasons is the high level and scale of the shadow economy in the country. Initiatives to legalize the shadow economy and hidden employment have faced serious resistance from oligarchs and monopolies. This is what we saw at this year's Relax Center. In short, 2019 could not lay the foundation for major changes in terms of the contribution of the non-oil sector to the state budget. This is due to the fact that the proposed tax package in 2019 encountered serious resistance from the monopolist and oligarchs. Thus, in 2019 there were new companies, initiatives and projects aimed at developing the non-oil sector, but the export potential of the non-oil sector remains low.

- Was there a positive dynamics in Azerbaijan’s trade turnover with foreign countries, accession to the World Trade Organization and in connection with the Open Government Initiative, the International Transparency Organization?

- Unfortunately, in 2019, Azerbaijan was not able to benefit from international and regional integration. We expected that this year an agreement on strategic cooperation between Azerbaijan and Europe will be signed, which will be a significant contribution to investment and trade relations between Azerbaijan and the European Union. At the same time, the signing of such an agreement will bring Azerbaijan closer to WTO standards. However, the position stated by the President of Azerbaijan regarding the World Trade Organization these days has once again convinced us that Azerbaijan does not intend to join the WTO in the near future. Speaking with a group of local journalists about the results of the year, Ilham Aliyev said: “Azerbaijan is not a member of the WTO, although we have already completed our negotiations with several countries in a bilateral format. But I think the time has not come yet. The reason for this is that oil and gas are still an important part of our economy today, and we do not need to join the World Trade Organization to export these products. ”

 But I think that basically WTO rules do not only reflect trade. In other words, the WTO trade rules consist of agreements reached through negotiations between member states. From this point of view, we are an integral part of this institution, since it is not only about trade and tariffs, but also about the competitiveness of services, a high level of protection of intellectual property, transparency of public procurement, information technology and liberalization of the civil aviation market. At the same time, WTO agreements also establish procedures for trade disputes and establish specific regimes for less developed countries. It also provides transparency in member countries by publishing and reporting on commitments. In this context, accession to the WTO is one of the most important factors for the non-oil sector, which also strengthens the international integration of Azerbaijan and contributes to the influx of foreign investment into the country. But the country's monopoly, as well as the expanding influence of Pasha Holding in business in 2019 and the escalation of public procurement, of course, impede WTO membership, and increase resistance in this regard. I believe that the main reason why Azerbaijan is not included in the list of 164 WTO member states is monopolization, as well as “pashization” and corruption. For other organizations, including the Open Government Partnership, it was still unsatisfactory. 2020 may be a year of significant changes for Azerbaijan in cooperation with this organization, because the organization has set certain obligations and conditions for Azerbaijan. Unfortunately, the participation of an independent civil society was not ensured in fulfilling these obligations. Nevertheless, the Azerbaijani government, with the participation of non-governmental organizations, prefers to manipulate this, which, of course, limits the advantages of the Open Government Initiative for both civil society and the state.

-What steps should Azerbaijan take for economic development in 2020? And can we expect these steps to be taken in 2020?

- One of the most important things that Azerbaijan could do in 2019 is the restructuring of state-owned companies, their management and privatization of the International Bank. But accountability and transparency, anti-corruption, antitrust and legalization of the shadow economy are also among the factors that play an important role in the economic development of Azerbaijan. In 2020, the above steps must be taken. In order to better manage state property, it must be restructured and some of its structures privatized. In particular, the International Bank of Azerbaijan should be open for privatization on the basis of healthy competition. In addition, Azerbaijan should strengthen its policy in order to benefit from international and regional integration. To secure a place in the international arena, it must achieve European law and the judiciary. In this regard, an agreement on strategic cooperation between Azerbaijan and the European Union should be signed next year. In this regard, it is also necessary to discuss the Association Agreement and the deep comprehensive Free Trade Agreement. Next year, a lot of work remains to legalize the shadow economy. Without this, it would be impossible to ensure the stability of the state budget. It is also almost impossible to increase the contribution of the non-oil sector to the state budget. On the other hand, in the fight against corruption, it is necessary to publish declarations on the income and property of the President, Prime Minister, their family, Speaker, Members of Parliament, prosecutors and judges. There are expectations that this will happen in 2020. Finally, in 2020, measures must be taken to increase economic freedom, liberalization and decentralization in Azerbaijan.