Azerbaijan Since Independence by Cornell Svante E

Author:Cornell, Svante E.
Language: eng
Format: epub
ISBN: 9781317476207
Publisher: Taylor & Francis (CAM)

Azerbaijani government officials, including President Ilham Aliyev, have on numerous occasions stated that the country’s economy should not rely solely on oil, but should, rather, diversify into other sectors primarily unrelated to oil. Oil and gas reserves from currently operational fields are likely to be depleted by 2025, and even if new fields are discovered, oil revenues will decrease considerably in a matter of two decades. This gives authorities a time window to use resources to develop the non-oil economy to ensure sustainable development. There are, however, serious impediments to the growth of the non-oil sector—some left over from the Soviet era, some newly created.

A first issue is infrastructure. Development of a sustainable non-oil economy will necessitate a solid infrastructural basis in the regions outside Baku. The requirements include roads and railways to transport goods, power stations to generate electricity for plants and factories, facilities to store and refrigerate agricultural products, and hotels and restaurants to attract tourists, among other improvements. At the time of independence, however, Azerbaijan’s Soviet-era infrastructure was in a condition fit to evoke despair. After a long period of little improvement, the problem began to be addressed. In 2007, for example, Ministry of Transportation officials announced that the equivalent of more than $500 million had been or was being invested in road construction works, with plans being made for the further development of a regional road network.49 Major highways such as the ones linking Baku and Quba (to the northwest), and Baku and Qa-zakh (to the far west) were renovated, and in Baku itself, roads were repaired and new bridges and tunnels were built to accommodate the rapid growth of traffic. A beltway around Baku was also being planned.

The government also began construction of gas-operated electricity generating stations in several regions of the country, which was expected to improve the availability of a stable and sustainable supply of power for the operation of industry. Many plants and factories in the food processing and light industry sectors have been opened in recent years, needing electricity but providing jobs. Tourism has also received a major boost, with the construction of hotels, restaurants, and recreational centers in various regions of the country.

Although most of the country still suffers from poor infrastructure, these measures show that the problem is slowly but steadily being addressed. This factor should gradually cease to constitute a major obstacle to the development of the non-oil economy However, it should be noted that most of the chemical and machinery factories such as those in Baku and Sumgait are hopelessly outdated. Because they use old equipment that is only profitable because of artificially low energy prices, they are in fact unsustainable. Thus, while infrastructure development is indeed helping the small and medium-size factories, the larger-scale metallurgy and chemical plants need extensive modernization if they are to return to competitiveness. A special state program to revive these sectors appears to be in order.

The second issue in the effort to build a non-oil economy is financial policy. A particular

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