After regaining independence in 1991, the Republic of Azerbaijan faced with huge economic and political challenges in the initial phase of market economy. The economic lag process starting in 1989 was significantly intensified within the first three years of independence. While production of GDP decreased on average by 5.7 percent in 1989-1991, the decreasing rate during the last three years has increased by 3.8 times. For 1993 the production of industrial and agricultural products was 2 times less than that of in 1990.
Widespread social-economic reforms carried out in the economy since 1994 as well as coordination of legislation, tax and bank system with rapidly changing economic situation, implementation of new economic policy that meets requirements of market economy principles stimulated to start development processes in all branches. Due to these reforms social-oriented economic development that reclined on market relations in Azerbaijan has been achieved, population living standards has been improved. Heydar Aliyev's decisive actions taken toward prevention of economic decline, civil war and Armenia’s occupation policy against Azerbaijan during first years of independence, as well as restoration of statehood traditions and stability had been seen in a life of every citizen in a short time.
One of the most important actions taken toward provision of social-economic development of the country had been the signing of the “Contract of Century ” that has a great importance for formation of oil strategy and policy not only in Azerbaijan but in the world as well. Firstly this contract covering 8 countries led to signing of 26 contracts with 41 oil companies representing 19 countries during the next years. Owing to concluded contracts oil sector of the country had been rapidly developed, the development of non-oil sector and solution of population social problems had been achieved due to funds received by the country.
For the purpose of creation of new property relations on land based on economic freedom and social justice principles, development of market economy and ownership initiative, gaining of country economic independence as well as food security and consequently improvement of financial well-being of Azerbaijan nation, land reforms had been conducted first-ever in CIS countries.
Important steps were taken by the government in order to form market economy principles and ownership class. In view of development of ownership, small and medium entrepreneurship and solution of the problems existing in this area, the consecutive state programs had been adopted, the legislative framework had been created. Strong measures had been taken in order to regulate state control in the economic sphere and prohibition of causeless control, number of iterative, parallel and unneeded revisions had been decreased. Adoption of the “Program of State Support to Small and Medium Entrepreneurship in the Republic of Azerbaijan (1997-2000)”, as well as laws “On Entrepreneurship Activity”, “On Enterprises”, “On Joint-Stock Company”, “On Unjust Competition”, “On Goods Exchange”, “Leasing Service” and other regulatory documents which provide creation of legal mechanism of market economy had led to formation of free competition environment in this area.
Above-mentioned and social-economic policy of Mr. Ilham Aliyev, the President of the Republic of Azerbaijan that brought to a new stage of quality during last 13 years, had produced its positive results. Execution of duties envisaged in the state programs adopted and implemented related to social-economic development of regions as well as decrees and orders covering other activities, improvement of legal framework had impacted on continuous development of non-oil sector in the country, improvement of quality of provision of social infrastructure in the regions, more improvement of ownership environment, increasing of investing, opening of new businesses and workplaces and consequently increasing of population employment and reduction of poverty level.
Complex actions had been taken to reach todays success gained in the social, economic, ecological and demographic areas of the country. As known, economic lag process starting in 1989 was significantly intensified within the first three years of independence. While production of GDP decreased on average annual by 5.7 per cent in 1989-1991, the decreasing rate during last three years has increased by 3.8 times. Only since 1996 continuously growing production of gross domestic product that is general indicator of the economic development, was achieved. According to the results of 2015 the volume of GDP per capita reached to 5703.7manats or 5558.7 $US; compared to 1995 GDP production increased by 6.4 times, including industry -4.8 times, agriculture -2.4 times, construction - 69.3 times, transport -4.2 times, communication - 28.8 times, trade -9.4 times.
In our country which had a great industrial potential while being in the structure of USSR the industrial production decreased at average annually by 19.0 per cent during the first 5 years after gaining independence. During the next years the industrial production increased at average annually by 10.6 per cent and had outrun not only development level of 1991 but even the level standing during 1980-90-s; during last 15 years industry has developed rapidly.
After successfully carried out works on the ”Contract of the Century”, oil had been extracted from the first oil well of “Chirag” field in November, 1997 and from “Azeri” field and deep water part of “Guneshli” field during next years, as well as gas extraction from “Shahdeniz” had been implemented, Baku- Tbilisi-Jeyhan oil pipeline named after H. Aliyev and Baku-Tbilisi- Erzurum gas pipeline has been put into operation, and the country became the exporter of gas, too. Moreover, as a result of huge projects implemented related with development of electric power area the Azerbaijan had provided its own energy security> and became leading partner in provision of energy security in the region and Europe as well.
The progresses had been also achieved in the non-oil sector of industry; industrial production in this area during 2005-2015 increased by 1.6 times or 5.1 per cent at average annual. Some part of goods, earlier exported from foreign countries to Azerbaijan, were already produced in the country. Production of foodstuff such as vegetable oils, sugar, beer, cigarettes, dairy products, fruit juices, and etc. had enriched our internal market and decreased our dependence on import of main food-products. Serious steps had been taken for the purpose of industrial development in the regions along with capital of the country; the share of regions on industrial production increased. As a result by means of rational use of existing potential, the activity of production enterprises was widening, achievements were reached in provision of dynamic development of the country economy, increasing of employment as well as increasing of population’ living condition by means of development of local entrepreneurship activities.
Formation of free entrepreneurship environment gave possibility to create new forms of economy as individual entrepreneurship. If share of production of non-state enterprises in 1991 made 1.1 per cent in total volume of industrial production then its share has increased up to 80.6 per cent in the result of implementation of appropriate economic reforms.
At the expense of oil resources of Azerbaijan the establishment of balanced economy together with formed strong oil sector and dynamic development of non-oil sector became new priority task. The State Leader made important decisions by the purpose to invest the development of non-oil branches of economy as well as updating of resource and technical base of existing enterprises in this field.
Generally, the establishment of the social and political stability in the country has presented corresponding conditions for internal and external investors; in 1993-2015 investment amounted to 184.1 billion manats from all financial sources was directed to development of the country’ economy. 143.6 billion manats of investment were directed to carrying out of construction, 34.9 per cent of which made funds of foreign investors. The increasing attention was paid to production and 55.1 per cent of total funds directed to fixed capital were used for construction of objects of production purposes. In the result of rational use of investment directed to fixed capital a lot of new important objects were submitted into use.
Effectual economic policy successfully realized under leadership of Mr. Ilham Aliyev, the President of the country, particularly comprehensive care rendered to development of the entrepreneurship enabled more development of agriculture that plays substantive role in the Republic social-economic life and forms the basis of regional economy; in recent years high achievements are gained in this area. In the ordinary sense of the word, Azerbaijan peasant turning into real owner of cultivated lands and property had achieved great results yearly in the field product output; compared to 1993 gross agricultural product output had increased by 2 times. Substantial achievements had been gained in increasing of different agricultural products output; higher indicators were achieved in the field of grains, potatoes, vegetables, market garden crops, as well as fruits production.
In 2015 3.0 million ton of grain, 840 thousand ton of potatoes, 1275 thousand ton of vegetables, 485 thousand ton of market-garden crops, 888 thousand ton of fruits were produced. During last 10 years grain production increased by 41.0 per cent, vegetables -13.1 per cent, fruit and berries - 42.0 per cent, grape -2.0 times, market-garden crops - 33.2 per cent, sugar beet -5.0 times, sunflower for feeding -14.3 per cent. It is definitely that the main role in gaining the achievements played care and attention of the State Leader to agrarian area and realization of the related state policy. Main factors stipulating the development of this area were investing to application of tax concessions for agricultural producers, preferential credits allocated for development of agriculture, subsidies funded for peasants through the state budget, farm leasing services, wide-scale melioration activities, construction of huge water reservoirs and implementation of road- transport and other infrastructure projects in the regions.
Development of the national economy, increasing of competitiveness of the produced goods influences on import- export balance of the country and enhances possibilities of food security provision. The results of the last years show that support to agrarian sector of the country by the state has positive influence and today demand of the population on food products is provided by means of local production.
In recent years investing to transport sector, renewal of transport means, construction of bridges, building of new motor ways, resurface of roads and other activities had been continued; efficient implementation of transnational projects positively influenced on development of the area.
For the state of January l, 2016 number of vehicles available in the country being 1322.6 thousand units increased for 2.2 times or by 710.5 thousand units. 1075.0 thousand of all vehicles made private motor cars. Number of motor cars per 1000 population reached to 119 (56 in 2005) and 52 (25 in 2005) of 100 families have private motor cars.
In 2015 freight transportation by all modes of transport made 226.4 million ton, passengers - 1891.9 million persons and compared to 2005 increasing had been gained correspondingly by 76.6 per cent and 89.1 per cent. The geography of transport activity had been expanded. The volume of international freight transportation by different modes of transport increased and average transportation distance of 1 ton of freight reached to 424.9 km.
Through submitted into use the Baku-Tbilisi-Ceyhan oil pipeline and gas line Baku-Tbilisi-Erzurum correspondingly 315.3 million ton of oil and 42.7 billion cubic meter of gas were exported for transportation of oil and gas extracted in Azerbaijan to the world market; Turkmenistan and Kazakhstan oil was transported to Europe by using transit potential of the BTC line. Wide-scale transnational infrastructure projects currently implemented as regard to realization of North-South and East- West (TRACEC A) transport corridors will further increase the importance of Azerbaijan as a transit country.
In the result of creation of and transition to information society as well as formation of e-government and development of the intellectual potential, the information and communication technologies (ICT) deeply penetrated into social-economic life of the country during last years.
The importance of ICT is in the foreground. With this aim the “National ICT Strategy for development of Azerbaijan (2003- 2012)” defined by national leader Heydar Aliyev on February 17, 2003 is an expedient action program for provision of transition to information society. Different measures based on the State Program (E-Azerbaijan) on development of ICT in the Republic of Azerbaijan confirmed by Ilham Aliyev, the President of the Republic is carried out starting from 2005 for the purpose of provision of implementation of tasks foreseen in the National Strategy; 2013 was declared the year of Information and communication technologies.
Effectual policy in this area, state programs and important reforms had provided more rapid integration of Azerbaijan to the world electronic space; important actions had been made in the direction of running of economy built on scientific potential, formation of e-government, provision of information security; application of modern technologies in different areas on daily life of citizens, enrichment of Azerbaijan-language internet resources, turning of most part of republic population into internet users had been achieved.
The concrete tasks and objectives up to 2020 as regard to development of the area had been specified in the “National Strategy on development of information society in the Republic of Azerbaijan for 2014-2020” confirmed by the decree of the President of the Republic of Azerbaijan dated 2 April 2014 and.
At present important actions are being made towards more expansion of population access to ICT services, application of new projects, modernization of ICT structure and diversification of the area.
The result is that in 2015 number of ICT equipment in the country and level of use had significantly increased; number of enterprises contacting with state authorities via internet increased for 36.8 times compared to 2005. Currently share of households with computers by country made 62.4 per cent, share of computer users - 69.9 per cent. Number of computers per 100 people compared to 2005 increased by 9.6 times and made at average 15.4 units. If in 2005 number of internet users per 100 people made 8 persons, in 2015 this indicator reached to 77 persons.
Actions taken for development of ICT in Azerbaijan are also reflected in the reports of international organizations. So, in the report of the World Economic Forum “Global Information Technologies 2016” the Azerbaijan on “Networked Readiness Index” raised from previous position for 4 points and ranked 53 out of 139 world countries, as well as ranked 8 on future approach of government to ICT sector, ranked 8 on government success in ICT promulgation, ranked 12 on ICT use and government efficiency. Azerbaijan ranked 67 out of 167 countries on ICT Development Index in the “Measuring the Information Society Report 2015” of International Telecommunication Union. In this report Azerbaijan ranked 60 out of 170 countries on ICT Price Basket Index. Having included to the range of cosmic countries, Azerbaijan has been supposed to have new and broad perspectives for the development of this field.
One of the main directions of establishment of national economy based on market principles is provision of integration of the country’s economy to world economic system. Since the second half of 1993 the stability of economy in macroeconomic level and realization of effective and regular complex activities for liberalization of foreign trade creates favourable condition for integration of national economy to world economy system.
So, while in 1993 the Republic had foreign trade relations only with 60 countries, these relations in 2015 was widened and import-export operations were carried out with 165 foreign countries, the volume of trade turnover increased for 15.3 times compared to 1993 and reached from 1353.5 million USD to 20.6 billion USD in 2015.
The structure of foreign trade relations during these years is changed. The share of food products imported to the country in total volume of import being 26.9 per cent in 1994 and 41.6 per cent in 1995 had decreased by 14.0 per cent in 2015. The reason of decreasing of import of food products was successful implementation of agrarian reforms and increasing of production of local food products.
Rapid development of economy, improving reputation among world countries resulted in raising interest to our country, as well as increasing of the number of foreign arrivals to our Republic year by year, in a word, enabled expansion of tourism activity. In 2015 number of arrivals compared to 2003 increased for 3.3 times and made 1.9 million persons, of which 35.0 per cent travelled to our country for recreation and entertainment. Due to increasing of population incomes during this period the number of Azerbaijan citizens travelling to foreign countries increased for 4.9 times compared to 2003 and made 3.3 million persons.
Over last five years “Kempinski Hotel Badamdar”, “JW Marriot Absheron”, “Four Seasons”, “Qafqaz Baku City Hotel and Residences ”, “Fairmont Baku ” in “Flame Towers ” Complex, “Rixos Guba Azerbaijan Hotel”, “Shamakhi Palace Platinum by Rixos”, “Park Chalet Shahdag” in Shahdag Winter-Summer Tourism Complex, “Bulvar Hotel”, “Qafqaz Tufandag Mountain Resort Hotel ” were constructed and submitted into use.
The special attention is paid to liberalization of prices for provision of overall development of market economy in the Republic of Azerbaijan. Reduction of prices is reached, inflation’s growth rate is decreased and deflation is occurred in the result of these activities. Increasing of inflation’s high rate - from 1012 to 1764 per cent was observed during 1992-1994. But during the next years in the result of economic policy carrying out by the government the inflation’s stability and reduction up to minimum was reached.
Commodity shortage in the trade network, population’s income decreasing, reduction of purchasing capacity regarding to increasing of consumer prices and tariffs of services in trade and service spheres during 1991-1993 were the reason of failing off population’s living conditions. The living conditions of the population have been improved since 1995 by averting of inflation and recession in the trade network. During 2015, 25.7 billion manats of consumer goods have been sold to population by trade and catering networks, its real volume has increased by 7.6 times compared to 1993. 66.4 per cent of consumer goods were realized in trade enterprises, 33.6 per cent — markets and trade fair. Sale of foodstuff, beverages and tobacco during 2015 has increased by 4.6 times, non-foodstuff - by 19.8 times compared to 1993. Each consumer purchased commodity from retail trade network in amount of2699.2 manats during 2015 at average.
Purchasing of non-food products by population since 1995 increased annually. While only 27.3 per cent of consumer goods bought by population in 1995 made non-food products, this indicator during 2015 reached to 50.0 per cent.
As a result of widening and development of service networks in all economic regions of the country the indicators of paid services provided to population are characterized by positive dynamics. In 2015 population of the country was provided with paid services in amount of 7.5 billion manats or 4.5 times more than level of1993.
The reforms implementing in the country’s economy within the framework of transition to market economy has provided annually increase of state budget revenues and decrease of budget deficit that was high at the beginning of 90s. According to preliminary data of 2015 the revenues of state budget from all sources increasing by 55.2 times had reached to 17.5 billion manats compared to 1995 and expenditures of state budget increasing by 41.5 times reached to 17.8 billion manats. The share of budget deficit in GDP has decreased from 5.2 per cent in 1995 to 0.5 per cent in 2015.
Improving of economic and social security of the population and rapid development of the country’s economy are main trends of budget policy. So, expenditures spent from the state budget for social protection and social security of the population during 1996-2015 has increased by 50.9 times and funds directed to development of the economy - 121.8 times.
Stable and dynamic development of the economy of Azerbaijan is seen from bank-credit system indicators. So, the volume of credits granted by bank-credit organizations has increased by 46.6 times compared to 2000. At the same time, the share of long-term credits in total volume of granted credits has increased by 47.7per cent and made 75.6per cent.
Real income of population characterizing living condition of the population in 2015 increased by 9.8 times compared to 1995 and made per capita 4380.1 manats. During 1995-2015 average nominal monthly wage and salaries increased by 37.4 times and made 466.9 manats.
Improvement of the country population living standards is clearly seen from the structure of using of income. While in 1993 only 5.5 per cent of population's income was directed to increasing of capital and savings, during 2015 it made 15.9 per cent of income.
Gradual improvement of population social conditions have influenced on poverty reduction. Poverty level increased for 5.7 times constantly year by year and reached from 24 manats in 2001 to 135.6 manats in 2015. However, poverty rate decreased for 8.6 times and reached from 49 per cent to 4.9 per cent.
The stable growth rate observed in the economy of the country during last century provided social development of the country, created conditions for improvement of living condition of the population, opening of new job places and increasing of employment. Exactly during these years there was a good success in improving the social defence of low-income layer of society, solution of economic and social problems observed at the first stage of transition period have been launched. Formation of market economy relations, as well as development of entrepreneurship activity, creation of business environment gives possibility to develop labour market and employment.
Economically active population was 4915.3 thousand persons, employed population was 4671.6 persons for the state of 1 January 2016; compared to 1991 number of economically active population increased by 31.6 per cent, employed population - 25.2 per cent; unemployment level in the country was decreased to 5.0 per cent.
The scale and intensity of changes in distribution of employment in state and non-state sector during last years is explained with increasing of share of employment from 34.6 per cent in 1991 to 74.8 per cent in 2015.
Successful realization of measures specified by the State Programs directed to social-economic development of the regions of the Republic of Azerbaijan (2004-2008 and 2009-2013) provides diversification of economy of the country and creates a base for development of non-oil sector, direction of investment to priority areas, realization of modern infrastructure projects in the regions as well as operating of new industrial and manufacturing enterprises and in the result of which 1480.4 thousand new and 1102.1 thousand permanent job places were opened during 2004-2015 in the country. The number of job places by the economic regions made 29.1 per cent in Baku, 4.5 per cent in Nakhchivan Autonomous Republic, 66.4 per cent in the regions, including 20.6 per cent in Aran, 13.3 per cent in Ganja-Gazakh, 8.2 per cent - Lankaran, 6.7 per cent - Absheron, 5.5 per cent - Guba-Khachmaz, 5.2 per cent - Sheki-Zagatala, 3.3 per cent - Daghlig Shirvan, 2.8 per cent - Yukhari Garabagh, 0.8 per cent - Kalbajar-Lachin.
On October 6, 2016, President Ilham Aliyev signed a decree "On the establishment of the National Coordinating Council for Sustainable Development of the Republic of Azerbaijan." The purpose of establishing of the Council is to define the national priorities and instructions in accordance with global goals and objectives that are important for Azerbaijan until 2030, to ensure the coordination of state programs and strategies covering the socio-economic spheres in the country with the Sustainable Development Goals.
According to the State Statistics Committee, the average economic growth rate in 2004-2010 was 16.9 percent, while in 2011-2014 it was 2.7 percent. In 2010-2014, economic growth slowed to an average of 2.7 percent per year. Since the end of 2014, the negative effects of the sharp drop in oil prices in global commodity markets have been observed in the Azerbaijani economy since the second half of 2015. In 2015, decline in the volume of exports and state budget revenues led to an increase in the unemployment rate by 2 percent compared to the previous year. Tensions in the current account balance due to low oil prices had increased the pressure on manat, and in 2015, the national currency was devalued twice.
Within the framework of strategy roadmaps for the national economy and 11 key sectors of the economy approved by the relevant Decree of the President of the Republic of Azerbaijan dated December 6, 2016, strengthening of fiscal sustainability and adoption of sustainable monetary policy, implementation of reforms related to privatization and state-owned enterprises, development of human capital and favorable business environment, improvement of business environment and regulatory framework for small and medium enterprises, ensuring profitable and effective access of SMEs to financial resources, increasing access to foreign markets, promotion of innovations, creating the competitive sector, facilitate access of agricultural producers to the means of production, domestic and foreign markets, increase the production of essential food products to replace imports in the domestic market, strengthening of food security, enhancement of employment opportunities in rural areas, creating a favorable environment for increasing of trade volume through Azerbaijan, to collect higher revenue from transit trade, and the implementation of certain measures in other areas has been successfully continued.
In 2018, effecting all-round and consistent reforms were continued in our country, comprehensive expansionary actions were taken to increase the non-oil exports, balanced development of regions was ensured, improvement of state-entrepreneur relations and business-investment environment, development of non-oil sector, application of private sector incentives, state support for the agricultural sector, small and medium enterprises have always been in the spotlight.
Economic growth was achieved and the development of non-oil sectors was accelerated as a result of the Development Concept "Azerbaijan 2020: Vision of the Future" approved by the relevant Orders and Decrees of the President of the Republic of Azerbaijani in order to ensure sustainable economic growth, improve the social welfare of the population, form a qualitatively new model of socio-economic development, and successful continuation of the measures set out in the “Strategy Roadmaps for the National Economy and Key Sectors of the Economy”, as well as the implementation of regular and systematic reforms and well-weighed measures.
Although economic growth was observed in the country in early 2020, the global spread of coronavirus pandemic in the world has had a serious impact on the world economy, as well as on the country's economy. In order to prevent the threat posed by the pandemic in the country, the operative implementation of preventive and urgent measures, a headquarters consisting of heads of relevant government agencies and institutions was established under the Cabinet of Ministers of the Republic of Azerbaijan and necessary regulatory measures have been taken in this direction.
The implemented complex measures have given an opportunity to minimize the impact of the pandemic on development of entrepreneurship and living standards, to prevent the rapid decline of our economy, and as a result, GDP in 2020 decreased by 4.3 percent compared to 2019.
Although the Covid-19 pandemic had a negative impact on the country's economy, the implemented comprehensive measures, including the support of entrepreneurship, the continuation of the vaccination process, exerted a good influence on restoring the economic activity.
As a result, compared to January-June 2020, in the corresponding period of 2021, GDP increased by 2.1% in real terms and amounted to 39.9 billion manat in current prices. Real GDP per capita increased by 1.6% and amounted to 3987.6 AZN or 2345.7 US dollars (2030.1 US dollars in the same period of the previous year).
The sustainable development strategy pursued in Azerbaijan is also highly valued by international organizations and economic institutions. In the next Doing Business 2020 report published by the World Bank and the International Finance Corporation, Azerbaijan was included in the list of the 20 most reformist countries in the world and declared one of the most reformist countries in the world.
By the Decree of the President of the Republic of Azerbaijan dated January 6, 2021, the “Center for Analysis and Coordination of the Fourth Industrial Revolution” under the Ministry of Economy of the Republic of Azerbaijan was established as a public legal entity. On April 19, the President of Azerbaijan signed an order on the development of "Smart City" and "Smart Village" concepts. The settlements in our liberated territories will also be restored on the basis of "smart city" and "smart village" concepts, which are the main trends of the Fourth Industrial Revolution.
Implementation of the Order of President Ilham Aliyev "On measures to establish a green energy zone in the liberated territories of the Republic of Azerbaijan" dated May 3, 2021 creates ample opportunities for work in this area.
“Azerbaijan 2030: National Priorities for Socio-Economic Development” was approved by the Order of the President of the Republic of Azerbaijan dated February 2, 2021.
Deliberate socio-economic policy serves for the development of human capital as a whole, poverty reduction and minimization of unemployment in the country, further increase of funds allocated from the state budget to social spheres, development of social infrastructure and, consequently, sustainable improvement of living standards of people.