What Reforms in Azerbaijan Promise for Swiss Companies
Since the collapse of world oil prices in 2014/2015, Azerbaijan has embarked on structural and economic reforms with the ultimate aim of diversifying its economy away from the oil industry. For this purpose, the Government has adopted strategic roadmaps targeting development in 12 sectors of the economy and since then, achieved significant progress in their implementation, which helped the country to quickly recover from the recession driven by the oil-price collapse.
These reforms continued and peaked in 2019, when the old cadres at the Government were replaced with younger and mostly Western-educated technocrats, and the Government agencies were restructured to raise their effectiveness and efficiency. These changes have already started to pick up the pace of the reforms. For example, as a result of the reforms carried out in tax and customs areas tax revenues to the budget has increased by 3.5% in 2019.
However, the reforms were not only limited to the executive branch. The Parliament was also dissolved for its failure to catch up with the reform process and snap elections were called. The Parliamentary elections of February 9, 2020, were held in a competitive environment where unprecedented 1300 candidates competed for 125 seats. The elections reflecting the will of the Azerbaijani people brought, according to preliminary results made by public by the Central Election Commission, many more young and Western-trained people to the legislative body and the new Parliament is also expected to accelerate the undergoing reforms in the country.
As a result of these ongoing reforms, Azerbaijan’s GDP has raised 2.2% in 2019. It is worth mentioning that the increase in the non-oil sector was slightly higher - 3.5%. Inflation stayed at the level of 2.6% throughout 2019, while strategic currency reserves grew by 6.4 billion USD to reach 51 billion USD. Further improvements in transparency of the tax and customs sector, introduction of softer tax control, and tax incentives, as well as reduction in tax burden for SMEs resulted in 9.2% increase in non-oil tax revenues to the budget.
The reforms carried out in Azerbaijan didn’t go unnoticed by international organizations as well. Doing Business Report 2019 by the World Bank included Azerbaijan among top 20 reforms in the world. Azerbaijan has climbed 11 places ranking 58th, ahead of Greece, Turkey and South Africa, in the Global Competitiveness Report 2019 of the World Economic Forum. The Heritage Foundation cited dramatic rise in judicial effectiveness, property rights and government integrity for improvement of Azerbaijan’s position by 30 places in its 2019 Index of Economic Freedom.
It is clear that reforms in Azerbaijan will continue and are irreversible. Immense efforts are put into diversification of economy and development of such non-oil sectors as tourism, agriculture, transport, logistics and communications. The economic indicators proves the success of these efforts. It is also evident that these reforms create immense opportunities for Swiss companies as well. As a matter of fact, Switzerland is one of the biggest investors into Azerbaijan’s non-oil sector and success stories of such companies as Stadler Rail and Holcim in Azerbaijan should encourage other Swiss companies to turn their attention to the gem of the South Caucasus, which is politically stable and full of economic opportunities.