"Non-oil sector grew in 2012"

"Non-oil sector grew in 2012"

Author: Interview by Ramin Naziev, Baku, exclusively to VK

 Director of the Center for Economic and Social Development, PhD Vugar Bayramov, summed up the results of 2012 in Azerbaijan's economy in an interview to VK. - Is the annual growth of GDP per capita connected to the rapid economic development of Azerbaijan or to some other processes? - Today the GDP per capita considering the price index is 10,000 dollars. The per capita GDP did indeed grow. This is also the conclusion of the State Statistical Committee. However, despite this high index, according to the State Statistical Committee the average monthly salary is just 520 US dollars  It is said that the income of the population increased by 12% this year. Yet the salaries and incomes of the population are very low in comparison to GDP. There are several reasons for this. First of all, double (black) accounting is still quite common in the Azerbaijani economy. In many private firms and even in some state structures official salaries do not correspond to actual salaries.  Sometimes employers do not conclude labor contracts. At the last meeting of the Cabinet of Ministers, President Ilham Aliyev called to intensify the struggle against the illegal economy and demanded that labor contracts be concluded in all structures. If there is no labor contract, the salary of an employee is unregistered. In addition, the real income of an employee is often different from his or her official salary. Therefore the average salary in Azerbaijan is so low in comparison with GDP. Our surveys reveal that real average salary across the country including Baku is 690-700 dollars. However, some other aspects should be considered. Salaries in structures financed by the state budget are very low.  For instance, salaries of teachers and doctors are really small. The average monthly salary of a teacher is only 150 manats and 120 for a doctor. Obviously, the low salaries in these sectors and their slow growth (about 10% annually) affect the average situation in the country. If we look at the year 2012, we can see that growth of salaries happened only in the private sector. In the state sector in 2012 salaries did not grow.  - Do you agree with with the opinion that the non-oil sector of the Azerbaijani economy in 2012 was growing faster than the oil industry? Will this tendency continue in the following year? - Indeed, since 2010 the non-oil sector has been revitalized. In 2011 the growth of the non-oil sector was 9% and 10% in 2012. However, if we compare the parts of the oil and non-oil sector in the formation of the state budget, we can see that the non-oil sector is far behind.  According to the official information of the Ministry of Finance, the share of the oil sector in the formation of the state budget is 75%, out of which 60% refers to the transfers of the State Oil Fund in the country's budget. The share of the non-oil sector, according to the official statistics, is just 25%. In GDP growth in recent years, a major role is also played by the oil sector. The share of the oil sector in GDP is over 45%, while the share of non-oil sector is low. The working-age population of Azerbaijan involved in the agricultural sector accounts for 42% of the total workforce, and their share in GDP is 6%, while the oil sector, which involves 6% of the population, has a 45% share in GDP. And of course this figure is not desirable for the composition of GDP. It is good that in 2012 the development of the non-oil sector reduced the imbalance between the two sectors. But all the same, the non-oil sector is still a major force in the economy. For Azerbaijan, the development of the oil sector is an important task, but it would be incorrect to see the non-oil sector as a single structure. Priority areas that need support should be identified in the non-oil sector. Recently the concept of "Azerbaijan 2020 - A look at the future" was prepared. This concept provides basic support for the tourism sector and the IT sector. These sectors are priorities for today. With the support of the non-oil sector it is also necessary to consider what areas are cost-effective for our state. The most profitable area for Azerbaijan is the agricultural sector. It must be remembered that agricultural products compose the largest share of non-oil exports. For example, in 2011 trade turnover between Azerbaijan and Russia amounted to 2.8 billion dollars. The value of the goods exported from Russia to Azerbaijan was 1.6 billion,  from Azerbaijan to Russia, in turn, 1.2 billion. The majority of the goods exported to Russia were composed of products of the oil sector. If we disregard Azerbaijani gas, it was mostly agricultural products that were exported. Therefore, in the coming years we will need to support the agricultural sector. In addition, a priority is the tourism and services. In my opinion. it is still necessary to develop light industry, the knitted garments sector and recycling. These areas in comparison with others are more profitable.To be continued 

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