Azerbaijan Economy

During January-August of this year 1 billion 572. 2 million manat was invested into Azerbaijani economy by foreign investors. Last year this indicator was more for 7. 3% compared with this year. According to the State Statistic Committee as in previous years GB’s share in investment to Azerbaijan is more. In the given period GB’s share in this area was 46. 6% or 732 million 687. 3 thousand manat. On the second place is USA with 326 million 272. 7 thousand manat (20. 7%), then comes Japan with 167 million 199. 6 thousand manat (10.6%), Norway 104 million 589. 1 thousand manat (6. 6%) and Turkey which invested 82 million 967.

2 thousand manat (5. 3%). This list of investors continues with South Korea 2. 4%, France 1. 1%, Iran 0. 6%, German 1. 8% Czech 0. 4%, Russia 0. 5% and other countries like United Arab Emirate, Saudi Arabia, Luxemburg, Italy, Finland, Austria, Sweden, Kazakhstan whose shares are 0. 1% or less than that. Investment portions from all this countries has decreased GB which is on the first place has decreased investment for 1. 9%, USA for 18.

4%, Japan for 19. 9%, Norway 20. 6% and Turkey for 19. 9%. This tendency is observed from the beginning of the year. According to the first term of this year, investments to Azerbaijan have decreased from all resources. In other words this process was also observed in international financial institutions. Not to mention, according to the first term of this year investment from foreign companies and international financial organizations has decreased approximately for 10. 1% compared with the same period of last year.

Among those financial institutions, investment to Azerbaijan was decreased for 40. 1% by ADB, 14. 7% by EBRD and 16. 3% by Islamic Development Bank. Among international financial institutions which give credit to Azerbaijan WB is in the first place. The list is continued by ADB, EBRD, IDB and The Kuwait Fund for Arab Economic Development. Some of them increased credits instead of decreasing. WB and The Kuwait Fund for Arab Economic Development are among them. However the overall credits to Azerbaijan by foreign organizations has decreased.

The reason for such decrease in financing Azerbaijan economy by international institutions is obvious. Several years ago it was noted that there is no need to give credits to Azerbaijan by the world leading financial institutions because of increasing oil revenues of the country. However the government continued this policy and considered the cooperation important. Thus to refuse foreign financial organizations wouldn’t be correct. The decrease in deducted credit was inevitable. So, this process has started long before.

Talking about foreign companies, there are several reasons why they decreased investment to Azerbaijan economy. First of all in world economy it has been several years that slowdown is observed. Also sustainable increase in oil prices has increased the cost of production for all products which decreased the investment everywhere. It has been a long time that foreign companies don’t want to be engaged in business activities abroad. These companies are mostly from USA, England, Japan and other developed countries.

These companies have a great portion of investment in Azerbaijan. That’s why this tension was obvious. The other reason is development of Azerbaijan economy. The number of local investors in the country has increased and businesses are held by local companies. For example, if we consider the improvement of infrastructure, we can see that local companies in this area are preferable. The construction of bridges, highways even some plants is being implemented by local companies. This is a very good sign. It is enough to use recommendations of foreign experts.

On September 10, according to the report prepared by WB and International Financial Cooperation about evaluation of business environment “Doing Business 2009” Azerbaijan was announced as a leader in business environment reforms in the world. In 2007 Azerbaijan was in 96th place, but this year it improved the position on 33rd place. In recent years it became possible due to reforms in direction of improvement of business environment. There were significant achievements in protection of investors’ interests.

According to this indicator Azerbaijan is on 18th place in “Doing Business 2009”. In last years’ report we were on 107th place. There is no need to worry about decrease in foreign investment. This process will continue. The slowdown still continues in world economy instead of stopping. Now every country and company thinks about internal security we think Azerbaijan should follow the same strategy. We must pay attention to the distribution of investment among economic sectors, not to the amount of it. In this case there are such areas that foreign investment must be denied.

For example, even though government has vast financial resources the Transport sector still gets financed from international financial institutions. For example till 2012 in order to improve railway system of the country $1. 4 billion credit was given especially from WB, ADB, EBRD and European investment Bank. Is there a need for this? We think that in the near future money flow from international financial organization must be absolutely decreased. While our currency resources exceed $10 billion, there is no need for such foreign investments.