Author: Interview by Ramin Naziev, Baku, exclusively to VK
Director of the Center for Economic and Social Development, PhD Vugar Bayramov, summed up the results of 2012 in Azerbaijan's economy in an interview to VK.
- The World Bank estimates that the level of investment security in Azerbaijan is low. Why?
- The World Bank has prepared a report on the protection of investments in different countries based on the results of 2012. Azerbaijan was touched upon in this report among others. But attention should be paid to the fact that in recent years there has been the strengthening of the position of the republic in this list. Starting from 2008, Azerbaijan was described in reports of various international organizations as a country that conducts a great number of reforms. However, along with this positive moment, reports of the World Bank Doing Business also note that there are a number of sectors and spheres in Azerbaijan that according to some factors are inferior to neighbors. In 2011, Azerbaijan took the 66th place in the report of the World Bank Doing Business; in 2012 our country was on the 67th place in World Bank's link on the security of business. In two fields Azerbaijan strengthened its position as a result of 2012. One of these spheres is taxes. Thus, the adoption of an online payment system for the tax sphere has raised the country's rating by three positions. Another area in which Azerbaijan has strengthened its position is dispute resolution; however there are some sectors in the country where there are problems, such as the beginning of a business career. According to the reports of the World Bank in 2011 this index was equal to 17 in Azerbaijan, while in 2012 the index dropped to 18. The other direction is the issuing of building permits. In 2011 based on this indicator the country was in 176th place, in 2012 – at the 177th place. Another area where there is a decline is property registration. According to this indicator Azerbaijan was in 6th place in 2011, and in 2012 it was in 9th place. Weaknesses were noticed in the protection of investors' rights and investment security. In 2011, Azerbaijan in these spheres was in 24th place, in 2012 it was in 25th. The deterioration of the situation in the security of investments is directly related to some property disputes. These disputes were caused by the expansion of the capital's territory. A number of violations of property rights took place and issues regarding the protection of property rights of Baku citizens were highlighted.
If Azerbaijan occupies 67th place in the field of investment and business security, Russia is in 112th and Georgia appeared to be highest in this list among the former Soviet list and is in 9th place. Armenia is in the 32nd place and Ukraine 132nd. In principal, Caucasian countries have good positions in the report of the World Bank Doing Business, and are among the top three countries of the former Soviet Union.
- Can we talk about a decrease in corruption in Azerbaijan in 2012?
- In 2012 several measures to combat corruption were introduced, but no sharp decrease in corruption was observed. These measures were not of a systemic nature; in a number of ministries changes in the structure were made, some minor officials, who were involved in corrupt transactions, were arrested. In general however, 2012 will not be remembered as the year of fight against corruption.
Concrete steps in reducing corruption, which will be implemented in the coming years, were made. Thus, in 2012, a system of security and development of the e-government was introduced. A presidential decree on the application and simplification of the electronic state was issued, new structure has been created in this field. In the summer of 2012, President Ilham Aliyev signed a decree on the application of the income tax return system, but this decree will come into force in January 2014. Under another presidential decree an introduction of the new system of counting salaries for civil servants was introduced. This decree also comes into force in January 2014.
In 2012 Azerbaijan was put into 139th place out of 174 in the corruption list of the Transparency International. To make a comparison with the CIS countries based on this factor, we are ahead of Ukraine, Kyrgyzstan, Tajikistan and Turkmenistan. In the same ranking Georgia occupies 52nd place, and Russia 133rd place. In the index of corruption Russia has 27 points, Azerbaijan - 28 points. In this report, Armenia is in 105th place and Belarus 123rd. Among the CIS countries, Georgia has the best indicator.
Meanwhile, it is obvious that the creation of the e-government in Azerbaijan will create good conditions for an effective fight against corruption. It is expected that after the presidential election in 2013 will be more stringent measures to combat corruption. Almost all decrees signed this year show that starting from the beginning of 2014 concrete comprehensive measures to combat corruption will be taken.
- The Central Bank of Azerbaijan has in the last year continued strict control of the floating rate of the national currency to the U.S. dollar – the manat has strengthened its position by 1 to 2% and the bar of 0.80 manats per $1 has not been exceeded. Why is such a policy conducted?
- The Central Bank retained the same currency rate through administrative actions. Despite this, it was decided to change the discount rate from 5.25% to 5%. This suggests that it was planned to ease the controls of the manat against other currencies. Strengthening of the manat to the dollar through administrative action poses some obstacles to domestic producers and reduces their competitiveness in world markets. Today Azerbaijani businessmen are not always able to export their goods. They are rather expensive - the reason for this is the high rate of the manat to the dollar. Control of the national currency through administrative actions hinders the export of local goods. Above all, this refers to goods of the non-oil sector. This process to some extent inhibits the development of the non-oil sector of Azerbaijan. Strengthening of the manat by administrative action creates some problems in business development, particularly in the non-oil sector.
Every year the Central Bank artificially adjusts the cash turnover of the country to strengthen the manat. During the global crisis, the Central Bank of Azerbaijan spent about $200 million per month to control the rate of the manat. At that time, the Bank bought manats, which were in circulation, and instead let dollars into money circulation. The strengthening of the manat by administrative action is unusual in politics.
But here we must note the positive aspects. The high rate of the manat makes it the most convenient unit to save money. The manat has become a reserve currency not only in the country but also in the region. This factor creates confidence in the currency. People can properly plan their expenditure. But it would be better to soften the floating rate of the manat rather than strengthen it artificially through administrative actions.
