AZERBAIJAN OR WHEN POLITICAL STABILITY IS THE FOUNDATION OF ECONOMIC PROSPERITY

By Karim IFRAK
Islamologist and codicologist specializing in the geopolitics of the Muslim worlds.

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A multi-ethnic, multicultural, multilingual and multi-confessional country, the Republic of Azerbaijan is a predominantly Muslim country, but constitutionally secular, guaranteeing the spiritual well-being of all without distinction.

Independent following the collapse of the Soviet bloc in October 1991, this young country has faced many important political, economic, social and security challenges. Several of its neighbors were quick to take advantage of this fragility, to the point that some of them concentrated on occupying as much as 20% of its national territory. The occupation was deemed illegal by the UN Security Council, but it was condemned in numerous resolutions 822 (1993), 853 (1993), 874 (1993) and 884 (1993), reaffirming the sovereignty, territorial integrity and inviolability of the borders of the Republic of Azerbaijan. For these reasons, the UN Security Council demanded that all occupying forces immediately, completely and unconditionally withdraw from the occupied districts of Azerbaijan. The rest is well known.

A COUNTRY BORN OF THE STRENGTH OF OIL AND A LOT OF WILL

Baku, capital of Azerbaijan, circa 1900

From nothing and unknown to all, Azerbaijan has managed to secure prosperity and security for its millions of citizens throughout the country, before slowly but inexorably rising to an almost unequaled level of international fame. In the first quarter of 2007, Azerbaijan’s GDP grew by 41.7%, probably the highest of any country in the world. Naturally, these rates cannot be maintained, but they reached 26.4% in 2005 (the second highest growth in world GDP after Equatorial Guinea) and in 2006 more than 34.6% (the highest in the world). This performance prompted the World Bank’s coveted Doing Business report to name Azerbaijan as the main reformer. In 2012, the Globalization Study and the Global Cities Research Network classified its capital Baku as a Gamma-level global city. This is why, due to its economic performance after the Soviet dissolution, Azerbaijan was called upon to become the « Caucasian Tiger », by many observers.

With world-class roads, including two connecting the road networks of Europe and Asia, Azerbaijan has worked hard to develop many national rail and road networks, open airports to international standards and build a strong merchant marine. Azerbaijan, a member of more than forty international organizations, including the United Nations and the Council of Europe, has been able to establish diplomatic relations with more than 170 of the 193 countries officially recognized by the United Nations since its independence. To be sure, petrodollar resources have been an important factor in the development of this republic, which nowadays is considered the “Pearl of the Caucasus,” but they are by far the only ones. A quick comparison with the long list of oil-producing countries around the world will be plenty of proof.

NATIONAL INTEREST FIRST

Aware of the importance of this scarce and precious resource, but above all of its limitations, Azerbaijan has constantly diversified its economy and invested in many foreign economies. Year in and year out, no less than USD 2 billion is being invested across Europe, the USA, North and South America, Asia, the Middle East and Africa to ensure the country’s sustainable and positive economic prosperity. But it is mainly due to the deterioration of the economic situation in 2015-2016 that diversification of the national economy has become the priority. As a result, many international companies have been called upon to settle there. Azerbaijan soon became the holder of the highest per capita foreign investment among the countries of the Commonwealth of Independent States (CIS). Germany, for example, is well known for its close proximity to this Caucasian country and has established itself with no less than 177 companies, compared to around 40 for France.

Aware of the importance of improving the business climate in order to attract the maximum number of foreign investors, Azerbaijan did not retreat from any sacrifice. This was a sacrifice that would soon bear fruit, given that the country ranked 33rd out of 144 countries in the World Economic Forum’s Global Competitiveness Index 2014-2015, mainly in terms of maintaining a stable macroeconomic policy environment over the past decade and its macroeconomic environment in 9 out of 144 countries. And in the process, the country was also named one of the top 20 reform countries by UNCTAD for its efforts in property registration, protection of minority investors and contract enforcement. The World Bank’s coveted Doing Business ranking ranked Azerbaijan 25th out of 190 countries in 2019, before dropping to 34th in 2020.

These efforts do pay off, especially as they go back a long way, since in 2003 Azerbaijan joined the Extractive Industries Transparency Initiative (EITI). An Inter-Agency Committee on the EITI was established to implement the obligations associated with this initiative. Taking into account that Azerbaijan is the first country to complete validation – the EITI Quality Assurance Process, which verifies compliance with EITI principles and criteria, the « EITI Prize 2009 » was awarded to Azerbaijan at the 4th EITI International Conference held in Doha, Qatar in February 2009. Nevertheless, in March 2017, Azerbaijan withdrew from the EITI, a day after the EITI Board had ‘suspended’ it for non-compliance with some of its standards. Following the withdrawal, President Aliyev issued a decree on April 5, 2017 on improving transparency and accountability in the extractive industries, in which the country commits to respect international standards in terms of transparency and accountability. This decree also provides for the establishment of a Commission on Transparency in Extractive Industries, chaired by the Executive Director of SOFAZ (Azerbaijan Sovereign Fund) and composed of the Deputy Ministers of Energy, Taxation, Finance, Economy, Environment and the Vice-Chairman of the Statistics Committee.

WELL-FOUNDED AND DESERVED INTERNATIONAL RECOGNITION

However, SOFAZ was chosen to carry out this delicate operation because in 2007 SOFAZ had already won the United Nations Civil Service Award for improving transparency, accountability and responsiveness in the civil service. The United Nations Public Service Awards are the most prestigious international recognition of excellence in public service. Created in 2003, they recognize the creative achievements and contributions of public service institutions to a more efficient and responsive public administration in countries around the world. SOFAZ is the first government agency to receive the United Nations Public Service Award among government institutions in Eastern Europe and CIS countries. This performance has been achieved, preserved and guaranteed thanks to the fact that the accounts of this state agency are audited by internationally recognized professionals, making this fund the top of the 2018 ranking of the “Linaburg-Maduell transparency index”.

As a result of its strong international reputation, Azerbaijan has been a constant magnet for investors around the world. These are international groups from the USA, England, Germany, Austria, Italy, Switzerland, Belgium, Norway, Sweden, Japan and many others. In France, more than forty large companies have established themselves there. Alstom, Danone, Lafarge, Société Générale and Suez are just a few examples. As for the TOTAL group, to date it retains 5 % of the capital of the international consortium operating the Baku, Tbilisi and Ceyhan (BTC) pipeline. And with the same insight, he is preparing the development of the offshore gas field of Absheron, and is trying to position himself for two other gas fields that will require very large investments, Umid and Babek. As for the AXA Group (via its Spanish subsidiary) and GROUPAMA Group (via its Turkish subsidiary), both invested in local insurers, AXA MBASK and BASHAQ INAM respectively.

Azerbaijan, rich in natural resources, but above all human resources, not forgetting its ancient history, is making steady progress every day towards greater positive prosperity. Even if the « same » people try to smear its image, this will not change the reality.

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