Development of non-oil sector

Though the role of the oil sector was leading in the speedy economical development marked for last 8 years in Azerbaijan but non-oil sector becomes during last years important in the general economical growth.  According to official statistics and macroeconomic indicators the growth in non-oil sector of the country in recent 8years has been more than 2.2 times. Strategy of diversification of the economy on account of oil incomes has justified itself. Azerbaijan has benefited from natural resources to build strong economy like each country experienced transitional period but could successfully diversify the    economy due to these resources and could minimize it dependence on oil. At the result of this strategy the steady tendency of durable growth in sectors like construction, tourism, agriculture, transport, information and communication technologies are observed.  As one of indicators of this tendency, more than  1 million workplaces were created in the country during recent 8 years and  great part of it occurred namely in non-oil sector. 

Agriculture, tourism, information and communication technologies, processing industry are considered to be basic priority areas in the development of non-oil sector in Azerbaijan. The international finance institutes especially note the importance of agriculture and tourism among these sectors. Thus 44 percentages of the employed population of the country namely are engaged in agriculture sector. For that reason the attraction of the systematic state programs, reforms and new technologies are implemented. In the figures of the report of the Cabinet of Ministers in the production of the agriculture products 34 percentages of growth has been registered in the 2011 compared to 2003.  The growth rate of general product of agriculture in three recent years made 2.5 percentages on average. Asian Development Bank collaborating closely with Azerbaijan considers agriculture and tourism as leading directions of the development of non-oil sector in the country, too. Bank considers that the improvement of infrastructure in the regions, subsidizing of producers of agriculture products and providing to them tax privileges helps development of the agricultural area having great potential in Azerbaijan. According to calculation of the bank full usage of tourism potentials of the country will lead to the growth of the GDP in non-oil sector. So, having the rich tourism potential of Azerbaijan and recent speedy development of tourism potential in the country promises big incomes on these directions of the non-oil sector.

Non-oil products produced in Azerbaijan at present, including electric machines and equipments, its spare parts, products of chemical industry, construction materials, ready weaving items etc are exported to different regions.  Billions dollar of amounts spent for supporting of small and medium entrepreneurship, granting of privileged state loans to those engaged in this field, allotment of subsidies to agriculture, reconstruction of transport-communication infrastructure throughout the country on the basis of orders of the country president and approved programs to create the ground for diversification of the economy and development of the non-oil sector. These expenditures have begun soon to give the benefit and have been a cause for big revivals in the non-oil sector of the economy. For realization of the measures connected with diversification of the economy of the country “State Program on social-economic development of the economic regions of Azerbaijan during 2009-2013”, “Program on poverty reduction and steady development during 2008-2015,”State program on reliable provision of the population of Azerbaijan Republic with foods during 2008-2015” and other programs were adopted with corresponding decrees and orders of the President of the country. These programs are executed successfully.

According to official information of the Ministry of Economical Development for recent 8 years the volume of the production of the industry was increased for 2.7 times, production of the agricultural products for 1.3 times, the work volume in the construction sector for 3.2 times, transport services for 2.4 times, communication and information services for 6.4 times. Analysis of the results of the 2005-2011 years shows that during this period besides general economic development, the durable development was observed in non-oil sector registered and GDP on the non-oil sector had rather stable growth rates. According to information of Ministry of Economic Development, the State Statistical Committee, Ministry of Taxes, IMF during 2009 in non-oil sector 6.2 percent of during 2010  7.9 percent of growth had been noted, which was a quite sensational results at time of global economic crisis. Just in 2010 the manufacture of industrial products was increased in oil sector for 1.7% and in non-oil sector for 6.6%. In general, development of non-oil sector the realization of measures under the “State Program on social-economic development of the economic regions of Azerbaijan during 2009-2013”, including construction of manufacture and service enterprises were given big place.  According to official statistics   since 2003 till date 1927 manufacture objects were put into operation. But in 2011 over 40 industrial enterprises had been put into operation in the 201 and construction of the approximately 100 establishments continues. Presently construction of more than 200 establishments including more than 70 industries is continued in the regions and launching of 75 manufacture-processing establishments is expected. These manufacture-processing establishments are built on account of preferential credits granted by the National Fund of Assisting to Entrepreneurship (SKMF) under the government.

Growth tendency has continued in non-oil sector in the 2011, too. The same year growth of the non-oil GDP amounted 9.5%, and for 11 months of the year total 45.5 billion manat worth GDP was produced, from which 21.5 billion manats or approximately 47% comes to the part of the non-oil GDP. At result balance has arisen with volume of the GDP produced in non-oil sector and GDP of oil sector for the first time within last years. Volume of the tax incomes in state budget in 2011 made 5 billion 475.1 millions manat.  2.9 billions from it comes to part of non-oil sector, which was  22% more than parameter of 2010. As it was said in the report of the International Monetary Fund that the non-oil economy in the 2011 had continued growth in Azerbaijan and for near future economical perspectives are positive as whole. According to information of the Fund the growth of 9.5% in 2011 recorded thanks to non-oil sector, especially construction and services sectors and it completely compensated 10% decrease in oil production due to technical reasons. According to report risks associated in Azerbaijan with economical perspectives, mostly are balanced and the ICF mission in Baku expects that crisis in eurozone will have limited impact on Azerbaijani economy.

IMF forecasts 6 percentages growth in non-oil sector in the 2012 in Azerbaijan. But Ministry of Economic Development forecasts the economical growth  in 2012 mostly on account of non-oil sector and it is expected to be at the level of 8.6 percentages but growth of GDP in non-oil sector will make 8 percentage  on average in three next years. Successful economic policy carried out in Azerbaijan on diversification will reduce share of oil sector in GDP to 29.3 percentages in 2015. As a result share of non-oil sector in GDP in 2015 will reach 61.3 percentages in the GDP from present 44.4 percentages. This should burn and this must increase (we should note that part of (the) oil sector 48.5 percentages. (let’s note that for figures of 2010 the share of oil sector in GDP made 48.5% ). According to the task put by the country president before the Government at early of 2012 the GDP which grown 300 % since 2004 till date is to be increased two times more in next 10 years. But this growth must happen due to non-oil sector.  It is said in the prognoses of the World Bank that near and middle perspectives of development of Azerbaijan economy must happen namely due to the non-oil sector.

Tendency of the durable development of non-oil sector observed in Azerbaijan in the last years is taken into account as base in rising of the rating of the country by international rating agencies, too. In April of the 2012 Moody’s İnvestors Service international rating agency has raised independent rating of Azerbaijan from Ba1 to Baa3. At that speedy development of non-oil sector in Azerbaijan has been shown as one of factors being a cause for increase of the rating, too. Agency notes that government supports the private sector with the help of the National Fund of Assistance to Entrepreneurship actively. About 125 millions USD of preferential credits have been granted by the fund to more than 100 companies in the 2010. Also other authoritative international rating agency Standard & Poor’s has  raised the sovereign credit rating of Azerbaijan in long-term domestic and foreign currency for one step till BBB- level in December of 2011 and so gave  Azerbaijan investment rating. Agency also has raised the short-term sovereign credit rating of Azerbaijan for one step from B level to A-3 level. At that as one of main factors the durable development in non-oil sector has been taken into account. Also as a result of strategy aimed at diversification  of economy , development of non-oil sector at Davos Economic  Forum’s  rating Azerbaijan was shown on 55th place for competitiveness of the economy and 1st in the CIS area.

So, Azerbaijan is benefiting successfully rich oil and gas reserves to achieve the long-term and durable economical development. The strategy of transforming of “black gold” development to human capital, leading force of non-oil sector, creation of strong, competitive economy independent of these incomes by using oil-gas revenues is yielding its results.