How Azerbaijan has avoided the resource curse
If you are a fund manager based in one of the EU member states you should open your eyes to investment opportunities in Azerbaijan. The energy-rich former Soviet republic on the southwest shore of the Caspian Sea is diversifying its economy. This augurs well both for the country itself and for foreign investors, Budapest Times concludes in its article Azerbaijan: Not just oil anymore.
The “resource curse” is the paradox that countries blessed with natural resources, especially energy resources, often tend to have worse results from economic development and diminished overall growth than countries that have fewer natural resources. Azerbaijan has avoided the resource curse. Its work with the International Monetary Fund and the World Bank to eliminate poverty in the country has paid off.
Azerbaijan was the first Muslim country to give women the vote a century ago, after the First World War, before the Bolshevik Communists took over the region during the Revolution. Given its history of equality between the sexes, Azerbaijan makes special effort for such initiatives to assist women entrepreneurs.
Azerbaijan has been working with the United Nations Development Program (UNDP) to empower women. With UNDP’s help, three “Women Resource Centers” financed by the European Union have been established in the country to help women create and expand their businesses, including through social media. The government pays particular attention to facilitating female entrepreneurship and progressive economic start-ups. And the country’s Ministry of Finance has made it easier, in a region historically hindered by bureaucracy, to form new companies, issue permits and allow tax incentives.
“Shrippy,” for example is an innovative service allowing users to tag and price consumer items they encounter. In a region where brands and price-tags matter the most, Shrippy lets users compare prices, find the right vendors, and figure out the best deal. Another start-up called “AtHome” lets the user fill her or his apartment with modern, classic or contemporary furniture with a click of your finger.
The national currency, the manat, is strong in comparison with other currencies in the region. Foreign confidence in the national economy is driven by a sense of trust created by the abundance of natural resources and the government’s steps towards using them for a sustainable future.
Unlike some other former Soviet republics, Azerbaijan has taken concrete steps to eliminate the corruption inherited from the “nomenklatura” (politically connected bureaucrats) of the Soviet and early post-Soviet era. As a result, the country “brand” is very favorable. The results are evident from investment flowing into the domains of culture, the arts, sports and renewable energy.
The international agencies Standard and Poors, Moody’s, and Fitch all given the country’s economy is a “Stable” rating with no grades lower than BB+. Azerbaijan’s main trade partners are European countries such as Germany and Italy. as well as Turkey and Russia. Purchasing Power Parity (PPP) in the country increased from $20 billion to $170 billion between 1995 and 2015.
A secular approach to politics, social life and culture predominates in this Muslim nation. A modern “E-Visa” regime, where visas can be applied for and received online, makes tourism yet another national asset.
Azerbaijan is called the “Land of Fire,” a name originating from the Ateshgah temple where Zoroastrian believers prayed, is one of the many gems offered by the Caspian nation. The country’s long history and culture, as well as its natural beauty and many types of climates, make it a major destination not only for local travelers from Russia, Georgia, and Turkey, but also from European countries such as the United Kingdom and Germany.
Baku, the capital, has a strong bid to host the 2025 World Expo. It boasts many world-class luxury hotel chains, and the city’s subway system is state-of-art both in design and in technology. Alpine skiing, museums, galleries, cultural centers and seaside resorts are just a few of the many attractions Azerbaijan offers. The Ministry of Ecology and Natural Resources of Azerbaijan has invested heavily in creating preserving a system of national parks.
For countries like Azerbaijan, sustainability is key. International financial institutions have shown appreciation of the country’s political and economic climate and its continual moves towards enhancing the reforms already introduced.
For this reason, and not only due to its natural resources, Azerbaijan is becoming a player in the global financial arena. Its profile will only increase in coming years.