Economy of Azerbaijan: structure and features

One of the few countries of the former USSR that have maintained a sufficiently high rate of GDP growth is Azerbaijan. The economy is developing steadily, despite the fact that the crisis of 2008 significantly affected all indicators, substantially reducing, in comparison with the pre-crisis level, growth in all areas of production activity. Nevertheless, according to GDP growth, Azerbaijan is still one of the world leaders. The economy survived due to the export of energy resources, and in this country anti-crisis measures were implemented through the use of foreign exchange reserves accumulated in a prosperous pre-crisis period.

Characteristic

The richest country in the South Caucasus is Azerbaijan. Its economy is two-thirds of the GDP of all other countries in this region. From 2005 to 2008, growth actually reached 24.1% annually, the highest value since the collapse of the Soviet Union. It was a real economic boom, and in terms of growth, Azerbaijan became the absolute leader in the world. The economy was scaled up so much due to the active use of natural resource potential: new hydrocarbon deposits were developed, volumes of energy resources were increased, foreign direct investments were attracted, oil and gas pipelines were built, and the export of oil products, crude oil and natural gas was rapidly increased. Hence the result: the transformational recession of the nineties was completely overcome, and GDP in constant prices rose by one hundred and six percent by 2008 compared to 1990. The economy of Azerbaijan in 2017 will be considered in comparison just with this grace period.

Foreign direct investment largely determined these successes, and, of course, the bulk (that is, almost entirely) of them went to the oil and gas sector. The first decade of the 21st century showed that two-thirds of external financing consisted of direct investments, and from time to time (for example, two years before 2004), their share was more than ninety percent of all foreign loans and investments. That is why the country was able to save money to overcome the 2008 crisis, and the economy of Azerbaijan in 2017 not only keeps "afloat", but, it can be said, is flourishing. Still would! Direct net foreign investment for several years pulled to the highest world index - about thirty percent of GDP. However, investment flows have undergone significant changes over time. Already after 2004, their influx into the oil and gas sector began to weaken. Moreover, in the period 2006-2008 there was even an outflow. But the matter has already been done - the funds have been invested, the development of the mining area has been properly stimulated, the state of the Azerbaijani economy has become exceptionally stable, and now it was possible to develop on its own.

Today

The oil and gas sector dominated until 2007, and it was supported by foreign investment, while domestic resources were directed to the development of non-oil industries, which also had a fairly active growth in the contribution to the economy of Azerbaijan. Today they are, for the most part, supporting the country's stable economic situation. The infrastructure - water supply, transport, electric power engineering, has considerably improved, the main government expenditures went there. The Azerbaijani economy in 2017 suffered the least damage from the financial crisis that broke out. But this could only happen because the inflow of foreign direct investment into development of deposits was so generous that very quickly it was possible to create and establish production and transportation of energy resources, and therefore, funds were received for the development of a sector other than oil.

The economy of Azerbaijan today is based on the newly created system of pipelines supplying oil and gas to the world market. This is the 2006 Baku-Ceyhan oil pipeline, this is the 2007 Baku-Erzurum gas pipeline. This country has been to this day the largest oil exporter in the Caucasus, and since 2007 has become the most efficient gas exporter. Oil production increased almost three times from 2004 to 2010 - 42.3 million tons, while exports grew even faster - three and a half times more than 35.6 million tons. The entrepreneurial role in the development of Azerbaijan's economy is simply enormous. World oil prices were also growing, so the rapid increase in oil production caused almost a tenfold increase in oil export earnings (2008: $ 29.1 billion). Ninety-seven percent of all exports accounted for gas and oil in 2010, which brought Azerbaijan nearly forty percent of state revenues.

Confrontation

In 2011, there were two events at once, the reason for which were clearly economic reasons. It is in this connection that the state of affairs in the confrontation between the two South Caucasian countries should be considered: how they spent the last decades after the collapse of the USSR, what they achieved, with what they remained. So, Azerbaijan and Armenia: the economies of countries. The first in 2011 entered the project for the construction of the TANAP gas pipeline (still considered a competitor to our "Turkish stream"). And in Armenia at the same time, there were mass protests to raise tariffs from the "Electric Networks of Armenia", that is, against the UES of Russia. However, the background of all these events was the political crisis of Nagorno-Karabakh. How Azerbaijan started and what it came to over these decades, we briefly disassembled. Now it's up to the opponent.

Armenia received a very weaker legacy from the USSR - the industrial base was branched and substantial. Armenia has no own fuel resources, but all the years of Soviet power this country was among the leading in the system of distribution of inter-republican goods. In engineering Armenia stood ahead of the whole Union (as a producer of many types of machine tools), nonferrous metallurgy (copper, molybdenum with developed deposits) was well developed, the chemical industry was well represented. This is only the main part of the Armenian economy by 1991. Nevertheless, the country did not save such a rich industrial diversity from the upheavals. The economic shock was simply deadly, as, indeed, almost all republics.

Armenia

All major economic ties broke up, and in connection with the events of Nagorno-Karabakh, Turkey and Azerbaijan established a blockade - Armenians and now cease to smile, remembering these "dark years". An energy crisis has started, since neither export nor import is possible. When the gas and fuel oil ran out, Yerevan and Hrazdan thermal power plants stopped. And after the Spitak earthquake - back in 1988 - the Metsamor nuclear power plant was closed down. By the way, this cataclysm brought forty percent of the republic's industry out of order, but Metsamor NPP remained unscathed. However, the 1986 Chernobyl was still fresh in memory, and therefore this fully functional station was decided to be closed away from sin. At the height of the energy crisis in 1993, Armenia decided to ignore the measures taken and restart the nuclear power plant. I must say that this phenomenon is considered to be unprecedented in the nuclear power industry. Two years later, only one of the two blocks was launched.

And then Armenia began to restore its economy. Market reforms were carried out, although there was no rapid growth, and where did it come from? The industrial base, remaining from the USSR, was subject to either one hundred percent modernization, or write-off to scrap. And with external investments in Armenia it was tight (unlike Azerbaijan, which lives with oil products). Let's compare the figures: foreign companies invested $ 1.8 billion annually in Georgia, four billion dollars in Azerbaijan, and a maximum of nine hundred million to Armenia (and only once, the rest years - much less). Moreover, the Armenian Diaspora, which was scattered around the world, mainly invested. In second place on financial injections - Russia. And in the two-thousandth Armenian GDP showed a good growth - fourteen percent. However, imports continue to exceed exports. Machines almost nobody takes, but metals go, agriculture (brandy "Ararat"), aluminum foil ... In principle, the list has almost dried up.

If tomorrow the war

Each day of the war between Armenia and Azerbaijan in Karabakh will cost both sides 50 million manat (Azerbaijani money and currency as stable). The economy of Armenia with its not too stable drama of such heat will not last unless Russia "fits" for it (and it always "fit"). Fights in the rocky terrain are expensive. Now the main economic alignment, which is neither deputy. The minister of economy of Azerbaijan in 1990-1993 could not change, neither the minister, nor the prime minister when there were really scale military actions. So, for today Azerbaijan has a gold and foreign currency reserve of fifty three billion dollars. For example, Ukraine has only eight (it was in 2014), Belarus has twelve. So, the Azerbaijani economy minister allocates 7800 dollars per capita, while even in Russia it is only three and a half thousand, although the gold reserve is more than ten times.

It is such an economic "hypodermic fat" that will allow Azerbaijan not to cut social programs even during the war (pensions, salaries and the like). But Armenia does not have such an opportunity at all. However, Azerbaijan understands that the consequences of the war can be very diverse, that is why it does not begin to return the lands that for some reason consider its own, and, without asking Armenia, draws its oil and gas pipelines through Nagorno-Karabakh. But the war is preparing for war. A fund of armed forces has been created with a very, very considerable amount on the account, which has not diminished by the smallest amount for many years. The economy of Azerbaijan in 2016 is very different from 2011, when decisions were taken on the pipeline's extension. In 2018, it is already planned for operation. The war did not begin, but armed clashes on the borders occur permanently with the use of artillery and military helicopters. So far, neither Armenia nor Azerbaijan has won.

Economy of the country in development

State policy is currently being implemented in the field of macroeconomics (social development). Privatized state property, the entrepreneurial role in the development of the economy of Azerbaijan is increasing. Trade flourishes, foreign investments continue to be attracted, and the management of state property after privatization limits monopolies and develops competition. Since 2008 the Ministry of Economy of Azerbaijan has been headed by Sh. Mustafayev.

However, this country began to develop not since the separation from the USSR, but much earlier, in 1883, when a Russian railway, included in the general network, came from Tbilisi to Baku. At the same time, merchant shipping on the Caspian Sea expanded considerably. At the end of the nineteenth century, Baku was already a large railway junction and a large Caspian port. Oil production began to develop, industrial enterprises appeared, boreholes with steam engines. The first foreign capital appeared here as early as the nineteenth century, making half of the world oil production of Azerbaijan.

Italy

Today, of course, Azerbaijan has much greater opportunities for economic development. The investment presence here is planning to significantly expand Italy. She started investing in this country many years ago, and the first deposits were from the fashion industry. Numerous joint ventures have emerged, which still function today. The market is now changing, expanding, and both countries are realizing the opportunities for mutual cooperation in the fields of logistics and transport. Trade after the crisis begins to recover, there are infrastructure and construction projects that can attract significant foreign investment.

Since 2010, the volume of direct investments in Azerbaijan by Italian companies has exceeded one hundred and five million dollars, and from here to Italy even more - one hundred and thirty-three, and only in 2016 Azerbaijan has invested almost one hundred and thirty million dollars in Italian projects. Now more than twenty companies are working together, among them such famous ones as Tenaris, Technip Italy, Maire Tecnimont, Drillmec, Valvitalia, Saipem and others. In 2017, Italy will increase investment in the economy of Azerbaijan. Details are already published in the press. In 2016, signed a contract with Danielle, and she has already started work here. In total, the presence of Italian companies in this country reaches a huge number - up to a thousand, and every year it grows. In terms of commodity turnover, this state is the most effective partner of Azerbaijan.

Economic districts: Baku

The regions of the Azerbaijan Republic are characterized by a special economic and geographical position of the country, its territorial and economic unity, its peculiar natural conditions and historically developed production specialization are determined. There are ten economic regions plus a separate territory of Absheron peninsula, where the capital of the republic - Baku is located. The latter includes Khyzyn, Absheron and Sumgait. It is the main fuel and energy base of the country, it produces the most significant amount of gas and oil, and also produces the most electricity.

The chemical and petrochemical industry is highly developed, in the second place heavy metallurgy, machine building, power engineering, and electrical engineering. Further, too, are significant enterprises of the light and food industries, building materials. Very well developed in this economic region is the service sector and transport infrastructure. Agriculture is also present: there is also poultry farming, and cattle breeding, meat and dairy (cattle), sheep breeding. Gardening, viticulture, floriculture, vegetable growing according to excellent agroclimatic conditions allow to grow saffron, olives, pistachios, figs, almonds, watermelon, the best grape varieties and much more.

Ganja-Gazakh Economic Region

There are two large cities - Naftalan and Ganja, as well as nine administrative districts. This area is very rich in minerals, it extracts not only gas and oil, but also cobalt, sulfur pyrite, iron ore, barite, limestone, alunite, gypsum, marble, bentonite, zeolite, gold, copper and much more. In addition, there are three hydroelectric power stations in these territories, as the Kura flows here. Production enterprises occupy a huge place in this economic region. These are heavy metallurgy, machine building, instrument making, plants for the production and repair of agricultural machinery, automobiles and communications equipment. Light industry produces products based on local raw materials: canned meat and milk, cognac, wine.

Many construction companies, where they produce wide panels, reinforced concrete, brick, expanded clay, marble building materials. In cities, primary processing of raw materials for ferrous and non-ferrous metallurgy, potash fertilizers, sulfuric acid is carried out. Agriculture supplies crops and potatoes, grapes and other fruits. Livestock, vegetable growing and horticulture are developed. This region has a fundamental transit significance: pipelines transporting oil and gas are located on its territory. Tourism is well developed, as natural and climatic conditions are extremely good. Numerous recreational facilities operate, including international ones.

Other economic areas

More recently, economists complained that the rest of the economic regions are not sufficiently developed relative to Baku, although the government is tirelessly engaged in their improvement. Many territories live on subsidies, because they can not master the path of development on their own. However, the reason scientists see is that they do not try too hard. The norm of today is the policy of dependency. Although such a natural and climatic country that is fertile may not have oil, it will become rich in tourism.

Azerbaijan has strong regions - they are in the minority, and also weak, where people can not live among practically absolute unemployment and lack of incentives, and therefore such areas may soon become deserted. The entrepreneurial region of Shamkir is quite well-behaved, even the blockaded city of Nakhichevan is gradually developing. It is also possible to characterize Ganja, Saatli and five or six more districts. But there are areas where not only industry but also tourism is completely absent, and agriculture has not yet acquired normal management and is not able to allocate and properly invest financial resources. However, work is being done on the ground, and a development plan has been drawn up. It remains to implement it.