“In the next two years Azerbaijan will not enter the WTO”

“In the next two years Azerbaijan will not enter the WTO”

Interview by Ramin Naziev, Baku, exclusively to Vestnik Kavkaza

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.

– How can you evaluate the work of the National Endowment for Entrepreneurs of Azerbaijan? In your opinion, did the grants issued through this fund help entrepreneurs in the private sector and create new jobs in the regions of the country?

 

– If we evaluate the activities of the National Endowment for Entrepreneurs of Azerbaijan, which was established under the Ministry of Economic Development, we must take into account the assistance to small entrepreneurs. The fund sells soft loans and it is considered a good thing. With the support of this fund entrepreneurs can develop their business. If you evaluate the performance of the National Fund for Entrepreneurs in the last two years, we can say that in 2011 entrepreneurs were given loans of 140 million manats, and in 2012 the fund had disbursed loans amounting to 200 million manats. As you can see,  there has been a sharp increase in preferential loans. But in spite of this fact, this fund did not play a really important role in the development of small and medium-sized businesses across the country. For several different reasons. First, transparency should be ensured while allocating the funds. Secondly, if you look at the structure of the projects supported by the Fund you can see that in most cases these are large projects with large budgets. Practically most of the money was spent on issuing large loans of several million manats. Of course, beginning entrepreneurs cannot apply for these loans. It is therefore important that the Fund pays more attention to the representatives of small and medium-sized businesses. Considering the fact that in 2013 giving soft loans through the fund will increase by 25% in comparison with 2012, it can be said that in this year the citizens of Azerbaijan will get more opportunities to use these loans for the development of small businesses. In addition, the mechanism of credit should also be altered. It is necessary to adopt a more open and transparent mechanism. It is important that in the future the Fund focuses on supporting small and medium-sized businesses.

 

– Is Azerbaijan’s entry to the WTO still considered a priority for the state?

 

– In 1997, Azerbaijan applied for WTO membership. For 15 years Azerbaijan has been negotiating it. But so far membership in the World Trade Organization has not been achieved. The bilateral talks between Azerbaijan and the WTO are still going on. As a result of these negotiations, Azerbaijan has signed agreements with five countries that are members of the WTO – the UAE, Oman, Turkey, Georgia and Kyrgyzstan. There are also bilateral talks on economic issues with the USA, New Zealand, Canada, Japan and with the European Union. As a result of multilateral negotiations, we can assume that there are several problems, and on some of them Azerbaijan cannot agree with the WTO. One of them is related to the status of Azerbaijan in the WTO. Our country wants to join the organization as a developing country, and the WTO wants to give us the status of a developed country. Another reason is that Azerbaijan proposes granting subsidies to the agricultural sector, with a limit of 10%, and the WTO has a 5% limit on subsidies. At this point in the agricultural sector, the subsidies issue we have is 14.5%. These negotiations show that in the next two years Azerbaijan will not enter the WTO. But it is estimated that by 2015, our country will be ready to become a full member of the WTO. By 2015, it will be necessary to discuss improving the legislation of Azerbaijan to revise the rates of tariffs and subsidies and to come to a common denominator with the WTO. I believe that by 2015, Azerbaijan will be able to eliminate all of these problems and differences, but today that issue was not a priority for the state. In “Azerbaijan 2020 – A look at the future” Azerbaijan’s accession to the WTO is not mentioned. This suggests that in the coming years membership in the World Trade Organization will not be considered a priority for us.

 

How would you compare the influx of foreign investments in Azerbaijan in 2012 to previous years? And where do most investments go?

 

– In 2012, the process of foreign investment continued. It is worth noting that since 2006 the volume of foreign investments has decreased. This is associated with a decrease in foreign investment in the oil sector. These reductions were carried out in the framework  of the “Contract of the Century” between Azerbaijan and the international oil companies. In the first 10 months of 2012 alone 12.6 billion manats have been invested in Azerbaijan. What is remarkable is that if we compare the amount of investments in the Azerbaijani economy for 2012 we can see that the share of domestic investment exceeds the contribution of foreign investors. This is due to the fact that the state budget makes investments in various economic sectors. Despite this, foreign investments played a big role Azerbaijan’s economy this year: $3.5 billion came in loans from international financial institutions, about $3 billion were invested in the oil sector, the remaining investments have been made in various areas of the economy of Azerbaijan. If you look at the flow of foreign investment in 2012 in the non-oil sector, it may be noted here that the Netherlands have the largest share of investments, amounting to 774 million dollars, the UK is in second place in terms of investments in the non-oil sector – $150 million, while Turkey invested $80 million, the UAE $75 million and Russia invested $35 million in the non-oil sector of Azerbaijan. But in general, if you look at the structure of foreign investment, it can be observed that the main flow of investment accrues to the oil sector. Much less foreign investment goes to the non-oil sector. The investments in the non-oil sector in 2012 were formed mainly by local contributions and transfers from the state budget. To summarize, we can say that in 2012 there were no major changes in the structure of foreign investment. Again, the leading role belongs to the oil sector, the UK was again the main foreign investor  because it invests in the oil sector. Also in 2012, the development of the non-oil sector was enforced by the state budget and internal resources

 

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