Farhad Amirbayov: "Azerbaijan's economy is larger than the economies of Georgia and Armenia put together"

Co-founder of the North-South center, vice-president of the Consulting-Analysis-PR union Ismail Agakishiev, and President of the Baku Interbank Currency Exchange Farhad Amirbekov.

- In your opinion, what is the role of oil revenues in the development of the modern Azerbaijani economy?

- To put it in one word, it is huge. In the structure of industrial production, the oil sector, the mining industry amounts to 74%. It forms a significant part of the state budget, directly or indirectly, and a sufficiently high total consumption of Azerbaijani citizens is somehow formed by oil revenues.

- What was built in the years of independence on oil revenues?

- To answer your question, we need to overview 15 years. The oil contract was signed on September 20, 1994, but actual revenues started a few years later. Therefore, we are talking about fifteen years when the role of oil in the economy grew and began to affect economic growth in general. The oil sector has become the motor of the Azerbaijani economy. All the reforms were carried out with the help of oil revenues. It is the country's defense, infrastructure, commodities (water, sewer, electricity), roads and all that is connected with the infrastructure, partly railways. Most of the qualitative changes took place in the rail sector in recent years, as the rail infrastructure is outdated. This is the overall quality of life and safety issues and the development of education and medicine.

- In your opinion, is Azerbaijan's economy focused on the development of the oil industry today?

- It was focused on it during the 1994-2010 period. The peak of oil production in Azerbaijan was in 2010, then oil production declined due to objective reasons associated with the depletion of layers. But a few years before reaching the peak of oil production, experts started talking about the need to diversify the economy, the reinvestment of oil revenues through Europe, attracting private investment, both domestic and foreign, the development of export-oriented industries, the proceeds of which should replace the oil revenues. Nevertheless, under the development of export-oriented manufacturing sector, we now have to change the direction and priorities of monetary and exchange rate policies.

- In your opinion, what sector in the nearest future will be able to replace Azerbaijan's oil revenues to maintain the current GDP and secure its growth?

- It will probably be more than one sector. We are surrounded by three large neighbors in terms of population, economic potential, and of other indicators. They are Iran, Turkey and Russia. Two neighbors are relatively small, smaller than our country - Armenia and Georgia - as well as countries that are beyond the Caspian, they are also, in general, our neighbors - Kazakhstan and Turkmenistan. This is the area of regional cooperation that we can develop. We are talking about the development of integrated logistics, air routes and roads as well as rail transportation. From logistics, we will receive income, they will grow, but we will not be able to replace oil revenues  with those from logistics. Another priority is agriculture. It is becoming an important factor, because the domestic market lacks food products. The food industry is severely lagging behind. Tea growing and rice production were once highly-developed industries, they need to be rebuilt to fill the domestic market. But agriculture provides a small surplus. The primary sphere in which you can earn is industry. We cannot create a large diversified industry, we must focus on the processing of our own raw materials. Nearly 500 kinds of products can be produced from oil refining and more than 250 from processing gas. It would be interesting to develop recycling at home and not to force the export of raw materials abroad. Meanwhile, the development of export-oriented industries will require not just integration into the world market but also embedding in those workflows that have already been formed. This is a very serious task. Therefore, we need to find not just sources of growth but sources of profit and concentrate on them.

- What, in your opinion, can Azerbaijan do to increase the price of oil? If it cannot cope with it alone, with which country should you cooperate?

- Some experts have expressed, for example, the idea of creating an alternative body to OPEC or to join OPEC. But for various reasons this is impractical for us. The amount of oil produced in Azerbaijan compared with many oil-producing countries is quite small and it is decreasing. From my point of view, more promising is not increasing exports of oil, but processing it. We must get rid of oil prices as macroeconomic indicators. Oil and gas products, industry, agricultural products, prices for which are formed between suppliers and customers, will be a more sercure source of income. The price of oil cannot be controlled, at least on our part.

- What is Azerbaijan's share in the total GDP of the South Caucasus?

- The Azerbaijani economy exceeds the economy of Georgia and Armenia taken together. But there is one thing, and it depends on factors such as access to the world's oceans. And for us it's Georgia, Russia and Iran. Georgia is a shorter path.