2016 embarks huge step towards diversified economy in Azerbaijan

2016 will definitely enter history as 'a year of big challenges” for the Azerbaijani economy. The global economic recession, which continued last year, affected the country seriously resulting in dramatic declines in revenues. Three to fourfold plummeting in oil prices on global markets that set them at a bottomline level of under $35 at the end of February 2016 became the biggest dilemma that the national economy faced.

The new reality made the country reconsider its economic policies and look for worthy alternatives to petrodollars, while an intention to reboot and diversify the economy turned the attention to promising non-oil sectors, which were earlier slightly overshadowed by a well-developed oil industry.

In March 2016, Azerbaijan's President Ilham Aliyev signed a decree on promoting the export of domestically produced non-oil goods, laying a sustainable basis for the switch to a new model of economy, independent of oil revenues.

Over the past 12 months, the country introduced a huge number of changes aimed at the creation of the favorable business environment.

Moratorium on business inspection, the decision that was taken in late 2015, became one of the main triggers for the improvement of the business climate. The state structures of Azerbaijan have conducted only 70 business inspections as compared to 70,000 checks in 2015, while tax audit decreased almost threefold.

Also, the changes facilitated the implementation of business activity in the country, reducing the number of licenses and permissions required for entrepreneurial activity. The number of licenses decreased from 59 to 37, while the number of required permissions dropped almost fourfold to 86.

Besides, the licenses are being issued with an open-ended term, while the procedures have been facilitated greatly as the documents are issued by the Asan Service. The cost of licenses was also halved in Baku, whilst cut down fourfold in regions of the country.

Later on, businessmen in Azerbaijan became eligible to get a document of the investment incentives, under which half of the revenue of an individual entrepreneur, profits of legal entity became exempted from income tax for seven years, while import of equipment for the implementation of the projects was also exempted from VAT and customs duties. Projects worth more than 1 billion manats ($563.7 million) were issued investment incentive document, and their implementation is expected to provide for the creation of almost 7,000 new jobs.

To support SME in the country the Labour and Social Protection Ministry developed a program of self-employment. To this end, some 6 million manats ($3.388 million) have been allocated from the Presidential Reserve Fund for the Ministry. Roughly 1,500 families were expected to use the program until the end of 2016.

The program envisages that all participants of the program pass special training, and get practical knowledge on the implementation of small and medium scale business, as well as get acquainted with financial aspects of entrepreneurship. Further, they develop business plans and present them to consideration of a special commission. Should the plan is assessed as successful and promising, the participants get all needed assistance for free.

Later on, ABAD public legal entity was established to implement projects that support small and medium enterprises, identifying the exact target group, and assisting in the preparation of business plans.

Furthermore, a Board of Appeal was established to resolve complaints and problems of entrepreneurs within a short term and in an easy way serving as an additional guarantee for protection of the rights of businessmen.

Certain innovations have been introduced to accelerate state property privatization and increase its efficiency, while numerous state enterprises and objects have been declared available for privatization. To provide transparency and efficient informing for the process, the State Committee on Property Issues developed a digital Privatization Portal (http://privatization.az) that comprises thorough information on enterprises and properties to be privatized.

In October 2016, the country developed a special mechanism to support the export of local output and promote "Made in Azerbaijan" brand on foreign markets, while the measures were developed basing on international practice and indepth analysis.

The mechanisms cover a number of promotional procedures, including the creation of some racks with ‘Made in Azerbaijan’ branded products in foreign stores, assistance in getting various certificates, patents, registration of trade marks, as well as sending of export missions abroad and participation in international exhibitions. Export missions have already been organized to China and the UAE and gave certain yields. Azerbaijan is expected to supply some 500,000 bottles of wine to China. The list of planned destinations for 2017 includes Germany, Pakistan, Qatar and Afghanistan. A total of 3 million manats ($1.84 million) has been allocated to finance the export support measures.

Doing Business 2017 placed Azerbaijan 65th among 190 countries in the global rankings on the Ease of Doing Business, ranking the country among 29 countries that implemented three or more reforms.

The year was also marked by a keen interest in transit projects being realized due to an advantageous geographic location of the country.

Commissioning of the BakuTbilisi-Kars railway was postponed to the first half of 2017, but the ambitious North-South project received a strong push towards successful implementation. Furthermore, the establishment of the Free Trade Zone at the territory of Baku International Sea trade port became one of the milestone events for the country. The economic area, which is planned to become operational in the first half of 2017, will bring up to $1 billion just in the first few years.

The construction of new important industrial facilities, such as industrial districts and parks continued throughout the year, paving the way for the development of such spheres as pharmaceuticals, machine building, light industry, and others.

The development of strategic road maps for the national economy and main economic sectors became a legal proof that a policy that promotes non-oil economy will be pursued further.

The document defined the measures, development goals, and priorities in almost all spheres of economy, while the successful implementation of measures (in the non-oil sector) is expected to provide a significant GDP growth of some 7 billion manats ($3.94 billion) by 2020. Some 27 billion manats will be required to implement the strategic goals outlined in the document.