Financial expert Farkhad Amirbekov told Vestnik Kavkaza about the prospects and directions of development of Azerbaijan's non-oil sector of the economy, as well as about the republic's potential to become a financial center of the region.
- Farhad muallim, in your estimation, how should effective economic cooperation between Russia and Azerbaijan be established in the current conditions?
- The urgency of building up Russian-Azerbaijani economic contacts is increasing for Azerbaijan, as we are experiencing the post-oil era - the third oil boom has already completed here (the peak of oil production was achieved in 2011). We had been searching a new model of economic growth during the whole period, and, as before, we focused on industrial and agricultural growth. I see the cooperation between Azerbaijan and Russia, which is considered in this context, in the division of labor, so that we try not to compete, but complement each other. The development of the agrarian sector is most active in Azerbaijan. We are restoring cotton production, a technical crops, which, as we know, gives a mass of useful products, about 25. We want to increase the production of agricultural products, which can serve as materials for food industry and be semi-finished and ready-made food for grocery shop deliveries. Considering differences in climate and the freshwater availability, as well as the need for high-quality, non-polluted with pesticides or GMO food products, I think Azerbaijan could occupy this niche in Russia's market. Of course, we must understand that such products will be expensive and intended for a certain level of income of the population - but it will become a kind of investment in human health. And this is only one aspect of Russian-Azerbaijani cooperation.
Interaction in machine building is also promising. In the Soviet years, machine building was a very strong side of Azerbaijan's economy, for example, in 1985 it was 22-23% of Azerbaijan's industry. Now we are looking for our place in the world division of labor, and in terms of effectiveness, especially logistics, I believe that the most successful way is to cooperate with neighbors. The entry of Azerbaijani products into technological chains that are already operating in Russia would be a reasonable solution for both sides. The aspect of mutual penetration is also important, even the diffusion of labor markets with the simultaneous appearance of large agroholdings in Azerbaijan and their development in Russia. Russia's grain production is impressive, the country is an absolute leader in this sphere. The experience of Russian agrarians, as well as their machinery and organization of production, would be applicable for us, what implies the migration of labor in both directions. Grain, by the way, is a very complex, multifaceted production, because you can produce dozens of kinds of different goods from it. Here I see the complementarity, cooperation, joint work of Russian and Azerbaijani production workers. If we follow this path, reduce competition among ourselves, we can compete with the outside world together.
- If we talk about agriculture, which way do Azerbaijani agrarians prefer: cheap GMO products for a large consumption market or elite, but expensive food?
- There is a legislative ban on the cultivation and production of GMO products in Azerbaijan, the state policy on this issue is absolutely unambiguous. As for the quality of products, this moment is, of course, very important. Indeed, it would be nice for Azerbaijan, which territory in comparison with many neighbors is not very large, to specialize in products with high added value. Among other things, it creates a great potential for science, as the specialization in expensive goods leaves a resource for financing research and education. In addition, it is an issue of competition: if a country specializes in cheap goods, it has to compete with a large number of producers of cheap food, including those who import their products thousands of miles away, for example, notorious Brazilian pears, Argentine meat, and so on. Competing with them can be difficult, which means you need to look for other niches. I would like to hope that we will choose a niche of more expensive and qualitative products, for example, meat without growth hormones and antibiotics.
- Can winemaking occupy this niche?
- Winemaking is developing very actively here. Let me remind you that Azerbaijani wines had their own place among the SSR goods, and their range was very rich. Now we are restoring this industry on a different technological basis, applying modern technologies and inviting foreign specialists. As a result, we make great wines, a certain group of leading manufacturers has already formed with its line of these products, they produce very good cognacs, excellent red and refined white wines. These products are highly competitive, and in order to return to the markets, it must be actively promoted. And this is exactly what I'm talking about: in economic terms, the surplus value of wine is quite large, and they are willingly bought.
- What other agricultural sectors could be developed in Azerbaijan?
- Out of the five Caspian states Azerbaijan has the longest coastline, which gives us the greatest opportunities in the production of seafood. This branch, of course, should be developed, we should restore the quantity of valuable fish, sturgeon, salmon and others that can be processed, dried, salted, preserved, frozen and sold fresh. Of course, this very interesting industry requires considerable investments. If we talk about black caviar, it is very expensive now, and almost all of it is exported. This kind of fishing is heavily regulated, which is natural: we cannot afford to lose Caspian sturgeon, beluga and others.
I must say that we are experiencing a period of formation of large agricultural holdings, there is a concentration of fertile land in Azerbaijan, which means investments in agriculture have been made, people have bought land. Large agroholdings need large areas, otherwise it is unprofitable to use equipment, so I think that positive developments in winemaking will be repeated soon in the grain industry. Of course, I can say nothing about the pace and coherence of actions, because it's up to private business, but, as a rule, after the grain time for more complex products comes.
By the way, very great potential is hidden in such an aspect as water ecology. Fresh water comes to Cassius mainly along the Volga, Kura and Araks rivers. The last two rivers, originating in Turkey, pass through Georgia and Armenia, the Araks flows through Iran. If Turkey still has clean rivers, then our neighbors pollute these waters very actively, and sometimes a rather complex chemical mixture comes here. Undoubtedly, they must clean up the mess, and all countries that are on the way of these rivers should be responsible for water quality. This issue should be dealt seriously, at the international level, and it's time when it needs to be decided. Moreover, the potential of the Caspian Sea is not fully realized.
- How much attention is paid to tourism in Azerbaijan?
- It's easy to answer this question if we compare this year's tourist Baku and, for example, Baku of 2013: we will see impressive growth in numbers and geography of tourists. A number of airlines fly from Arab countries to us, several flights a day, and these tourists do not stay in Baku, they start actively traveling around the country. A lot of tourists are from Russia, and not just in Baku, but also in the northern part of Azerbaijan, on the Yalama seashore, which is close to the Azerbaijani-Dagestani border, with very spectacular places.
Of course, tourism is a definite indicator: if it grows, it speaks not only about the quality of logistics and hotel services, but also that people like the atmosphere, they feel comfortable. It is impossible to deceive people: they know whether they feel good or bad, whether they have a good rest or not. Tourists take into account the presence or absence of political risks, crime and so on, so that I would regard the growth in the number of tourists in Azerbaijan as an increase in the country's rating.
- Can Azerbaijan pretend to be the financial center of the region in the long term?
- This topic has been discussed repeatedly over the past 20 years, but it is not yet possible to implement it within the framework of the current world financial system. When we talk about investments, we mean foreign investors and try to create special conditions for them, but foreign investment is not enough to develop the domestic financial system and domestic markets at least at the national level: we need access to investments in national currency. If this factor of economic growth is not ensured, which is mainly the Central Bank's area, there could not be financial market with investment qualities. So, we need to change the financial model of development, which is currently focused on oil exports. Oil is sold for dollars, then there is no investment in national currency, and if we are talking about an alternative economic model, then it should have a corresponding financial model.
- Can Azerbaijan be interested in creating its own payment system?
- Our payment system is based on SWIFT technologies, all transactions in the country are accounted for and realized through this system.Of course, we must pay SWIFT certain money after each transaction. We do not have a purely national payment system, because within the existing economic oil model there is no such need: the issue of manat by the Central Bank takes place in an amount not exceeding the currency earnings from exports. As part of the development of the financial market, this component could would be considered and analyzed, but so far Azerbaijan has been satisfied with SWIFT payments.
Of course, we remember the events of 2010, if I'm not mistaken, when SWIFT unilaterally cut off Iranian commercial banks and their National Bank from their payment system without explaining: there were no decisions of international organizations, the UN, international sanctions were not introduced in this area, this was done unilaterally. Of course, it indicates some bias of the company, and I hope it will not happen again, because it will create a systemic risk. If SWIFT stops serving us, then we will have to return to paper payments, to the pre-electronic era, at least for a while, which is both expensive and risky. But for the time being, let's say, these are hypothetical fears.