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28/09/2016

As oil prices remain low, Azerbaijan makes openings to investors, tourists

Europe's East

As oil prices remain low, Azerbaijan makes openings to investors, tourists

One of the Baku boulevards on which the F1 race will take place. [Georgi Gotev]

Azerbaijan, a country which has been relying too much on its important oil and gas sector, is making moves to diversify and open its economy to investors, and to bring in more tourists.

The fall in oil prices has severely hit Azerbaijan. According to the International Monetary Fund, the fiscal break-even oil price per barrel for it is $93.60 – triple the current price.

>> Read: Declining demand for exports hits Azerbaijan

In an article published yesterday (21 January), Azerbaijan’s President, Ilham Aliyev, says that under the current circumstance, the goal of the country is to rapidly develop the non-oil sector in the coming years. For now, the non-oil sector accounts for about 70% of the country’s gross domestic product. However, the export of hydrocarbons constitutes three quarters of the budget revenue.

Speaking to the cabinet on 18 January, Aliyev was quoted as saying that better conditions for business need to be created, and that the economic and financial system of the country should become more transparent and less bureaucratic.

“Businessmen should have every opportunity to implement large construction projects in Baku and other cities. Sometimes business people are faced with various difficulties – bureaucracy and corruption, as well as unreasonable demands,” the president commented, adding that these practices should stop.

Attention will also be given to developing tourism. Indeed, according to reports, Azerbaijan is considering lifting the visa requirement for EU and Turkish nationals. Azeris and Turks have excellent relations, and understand each other without needing translation.

Gudrat Hasanguliyev, a member of Azerbaijan’s parliament, who announced the planned visa waiver, also said that it was important to accelerate the privatisation process.

“It is needed to privatize universities and other educational institutions, enterprises in Azerbaijan for reducing burden on the state,” he said, adding that it was time to privatise the structures as the electricity distribution company Azerishig, the gas distribution company Azerigas, and the country’s airline, AZAL.

On 19 January, the legislature adopted a draft law, according to which material, technological equipment and plants imported by legal entities and individual entrepreneurs investing capital in the priority spheres of Azerbaijan’s economy will be exempted from customs duty for seven years. 

Also, it was reported that the expenditure part of the country’s budget would be revised.

This is largely due to the new exchange rate policy. As a result of falling prices, Baku allowed the country’s currency, the manat, to float on 21 December. The currency then lost nearly half its value in one day.

Discontent was reported in several cities over the price hikes, and the collapse of the national currency.

Finance Minister Samir Sharifov was quoted as saying that certain social benefits would be offered, in order to reduce and mitigate the impact of this increase on the most vulnerable members of Azerbaijan’s population.

The forecasts for the state budget will be made, taking into consideration the $25 per barrel price of oil, he explained.

Reports indicate that Azerbaijan has not scrapped plans to host a F1 Grand Prix in Baku in June. The country is also preparing to host the Islamic Solidarity Games, a mini-Olympics of sorts, for the Islamic world.

Further Reading